A Capitalist in North Korea: My Seven Years in the Hermit Kingdom

by Felix Abt

  I asked the officials what would happen if I caused a traffic accident. I got a surprising, and somewhat patriotic, answer: “The traffic police will ask you which organization you are working for, and when you answer that you’re the head of the ABB-representation, they will let you go.” The government, as a matter of fact, considered my employer to be an organization legitimately helping the DPRK. The opening of the ABB office, a year before I arrived, was widely reported by the North Korean media because it was trying to alleviate the electricity shortages.

  Even on Sundays, expatriates were masters of the streets while North Koreans tended to stay inside. On weekends, only a few cars drove around the streets, and rarely were they government vehicles, because petroleum was rationed on the weekends. Korean drivers needed a special permit on Sundays, which was almost impossible to obtain, as the government wanted to save on gas expenses. Every Sunday, I went on pleasant trips around the quiet and empty streets of the capital.

  The auto industry expands

  Until the end of my stay in 2009, more cars and a wider variety of vehicles took to the streets of Pyongyang. Within the first four years, I got the impression that traffic may have even doubled. But the government didn’t publish official vehicles statistics. Recently I read in a foreign newspaper that the total number of cars was less than 30,000, a number that could very well be an understatement given the DPRK’s economic improvement over the past decade.

  More interesting was the involvement of the internationally known and anti-communist South Korean reverend Sun Myung Moon, who headed the Unification Church and passed away in September 2012. In 2003 the first few hundred Hwiparam cars with 1,580 cc engines hit the roads of Pyongyang. To construct them, knock-down kits from Fiat were imported and assembled at a car factory near Nampo, a small industrial city about 30 miles southwest of Pyongyang. The company that became the country’s second car manufacturer and dealer was a joint venture belonging to the North Korean state-run firm Korea Ryongbong General Corp., and to the Seoul-based car manufacturer Pyeonghwa.

  The latter group is a subsidiary of Moon’s church. His family today holds 70 percent of the shares, and Moon, because of all his holdings, was a billionaire.

  The company had an annual production capacity of 10,000 units, but in 2003 it sold only 314 cars. With more models hitting the streets it gradually increased sales over the following years, earning a profit for the first time in 2009. Companies and state agencies became obliged to purchase new cars from Pyeongwha, instead of buying imported cars.

  For a while, it was a sign that North Korea was truly on a path of self-sustenance. But the firm wasn’t profitable, earning about $700,000 in 2009 from the sale of 650 cars, $500,000 was remitted to its parent group in South Korea. According to the Spanish-language Chilean newspaper La Tercera, the Unification Church may have wanted to close the company in exchange for other rights in North Korea, such as setting up a hotel supply trading company.

  A billboard for a new car assembled in North Korea refers to it as “Whistle,” and a “strong and beautiful car.” Pyeongwha (Peace) Joint Venture Company’s first car called Hwiparam (“Whistle”) is an updated version of Fiat’s Siena. The imported complete knock-down set was assembled in its factory in the port city of Nampo. Ordinary North Koreans believed it was a car designed by North Korean engineers and entirely made in North Korea, a notion that is not entirely true.

  The successful young North Korean athlete on the advertising billboard is being rewarded a car, as is usual in North Korea. Boys and young men dream of driving or even owning a car some day when the country becomes “prosperous and strong” as predicted by the Korean Workers’ Party. They too are expected to work equally hard as the young sport champion to achieve that goal. The men walking under the billboard, however, may not have such dreams any longer: they would be happy to buy even a motorbike or just a bicycle during their remaining lifetime.

  In 2006, a pick-up truck and an SUV were added to the range of cars assembled in Nampo, again using knock-down kits from Chinese manufacturer Dandong Shugang. In 2006 the company announced it would build the new Junma, a luxury car which resembled the South Korean Ssangyong Chairman car (which itself resembles Mercedes-Benz). That same year the company agreed to cooperate with Brilliance China Auto and from 2007 Brillance’s Junjie car was made under the name Hwiparam II.

  When I departed Pyongyang in May 2009, the venture transferred for the first time a profit that year of $500,000 to the South Korean majority owner. A few months later I travelled to Pyongyang, this time as a visitor and non-resident businessman. Nothing had changed in the meantime except that it seemed there were more cars in the street and more propaganda posters hung up in the city promoting the 150-day speed campaigns launched in May 2009. Those were two slightly conflicting signs of forward and backward movements at the same time, or, as they say, one step forward and two steps back. That’s North Korea, living and surviving with contradictions! I thought.

  The poor quality of North Korea’s power generation, transmission and distribution was a consequence of the erratic movements. Hugely fluctuating voltage and frequency became an enormous problem for automobile and other factories.

  When Pyeongwha started using spray booths to paint cars, they were shocked at the uneven patches of paint that were standing out due to this “flicker effect.” Only after installing our stabilizers the car painting could be resumed and the promising car venture was finally on track.

  It was ironic that, at the time, the George W. Bush administration was strangulating the North Korean economy with sanctions. Yet despite the setbacks, I noticed that more Malaysian Proton sedans, German Volkswagen Passats made in China, and other elegant cars were hitting the roads. With the shortages of fuel since the end of the Cold War, I was likewise surprised to come across one American Hummer SUV—the notorious gas guzzler—with the number plate of a state agency!

  On my way to work on a main street in Pyongyang at 7:30 am, I took this photo from my car in March 2007. Even though the streets here aren’t crammed, the capital streets witnessed a steadily swelling amount of traffic over the years.

  As I drove around, I frequently observed policemen stopping North Korean drivers to check their papers. They were looking for any infraction, such as incorrect information, that would allow them to extort a fee from the driver. In the end, I actually felt some sympathy for these police officers. In other countries, such as Egypt and the Ivory Coast, I drove nice cars around while policeman could barely make it by with their salaries. They needed the extra income.

  Most foreigners, despite being well-paid, were let off. Normally, when the policemen at control checkpoints saw me in a vehicle of the company driven by a company driver, they waved us through without stopping us. Obviously, my “long nose,” as many Asians jokingly called this Western stereotype, enjoyed some respect on the streets. The police were afraid of a foreigner witnessing their dubious practices and telling the world.

  Pyongyang boasted three major highways that were well maintained compared to other countries I lived in. And the dozens of tunnels and bridges cutting at times a straight path through mountainous terrain is truly an engineering masterpiece. One 200-kilometer expressway stretched from the capital to the major city Wonsan on the east coast, while another 43-km expressway continued from Pyongyang to the port city Nampo on the west coast. Finally, a 100-km motorway from Pyongyang pointed southwards to Kaesong. It has at least some excellent infrastructure for a country considered poor.

  Looking around the roads, I saw crumbling infrastructure that, in all likelihood, worsened the country’s food shortages—because trucks faced constant challenges transporting agricultural produce to the cities. Leaving out these impressive highways, the rest of the road network was pretty much left unpaved. The various pathways were neatly laid piles of crushed stone, gravel or dirt that went unmaintained. During one of my car trips around the countryside, the constant tremor of driving over the street made me vomi
t. Heavy rains in the summer months triggered landslides that further damaged the frail road infrastructure, further aggravating supply shortages.

  Like in the old socialist days in China and Vietnam, foreign residents of North Korea needed a permit to leave the capital. I had no problem getting these in a couple of days. But they were allowed to travel 35 kilometers out of central Pyongyang, or up to the first round of military check-points without such a permit.

  Relaxing the totalitarian rules

  Though the state-guided travel system was more prominent before the economic collapse, North Koreans who want to travel within the country continue, by law, to need a document noting their destination, purpose, and period of travel. This was issued based on the recommendation of the work unit’s party secretary.

  But since the breakdown of government services in the 1990s famine, more North Koreans are traveling without authorization. Local business people told me that traders, along with anyone else with some extra cash, could easily buy themselves out of trouble when caught without a travel permit. Even so, this rarely became an issue.

  As I drove further out of the cities and into the countryside abyss, with its rolling hills and parched wheat fields, I saw more and more people walking instead of using cars. It was a sign of the true remoteness and poverty of these areas, which included the sight of undernourished animals and famers working the fields with bare hands. Some farmers rode around in small carts, and when they sat in larger carts, they were pulled along by oxen. I felt I had landed in a previous, more prelapsarian decade, especially with all the oxen around.

  To my amusement, a traffic sign prohibited ox carts to pass by revolutionary sites, out of fear they would defecate close to these venerated monuments. These strong, resilient and patient animals weren’t merely shuffling goods along roads, but because of the limited mechanization and shortage of fuel, plowed rice paddy fields. I jokingly got the impression that, unlike in China and Vietnam where every year was the year of a different animal, in North Korea every year was the Year of the Oxen.

  Takeover of the bicycle

  To be fair, North Korea did not remain dirt poor for so long, as I witnessed a gradual change over time. In my rural travels, I saw more locals mounted on bicycles, suggesting that more people were doing better financially and could now afford this simple but, by the living standards of most North Koreans, expensive vehicle. Quickly, the rising supply of bicycles made prices drop from more than $50 to between $10 and $30. It was an enormous contribution that put bicycles in the hands of regular people.

  Most North Koreans who earned some money purchased a bicycle, because it was considered a somewhat prestigious marker of wealth—similar to how the nouveaux riches Chinese view cars.

  Second-hand bicycles imported from Japan used to be by far the most popular ones. Mr. Pang, a repair man who came to my house when something needed to be fixed told me that although his used Japanese bicycle cost much more than a new Chinese bicycle, it was still more economical as, unlike Chinese bikes, it hardly needed any repair and replacement parts. But the dream of many North Koreans to become happy owners of Japanese bicycles was shattered when Japan ratched up its embargo in 2006 by denying port entry to the North Korean ferry Mangyongbong-92 that made 20 to 30 trips per annum between the Ports of Niigata, Japan and Wonsan, North Korea always carrying second-hand bikes among many other equally popular products from Japan.

  A trader rides her products around on a bicycle, a small but important way of linking manufacturers with markets

  It’s a little known story that bicycles played a big role in propping up North Korea’s informal and privatized economy, because they helped small traders shuffle goods between the manufacturers and markets. These bicycle riders, in turn, became an informal merchant class.

  Chinese investors, in particular, jumped on the huge potential of bicycles. These outsiders were familiar with the bikes’ economic value in their home country, where they facilitated trade in cities and towns that were heavily populated and had little room for cars. In October 2005, one Chinese businessman set up a bicycle factory near the port city of Nampo, which was praised by two visiting premiers, Kim Jong Il and the Chinese president, Hu Jintao.

  Kim Il Sung square on a rainy day. The entire square, pictured, is reserved for male bicycle drivers.

  Despite the resulting improvements over poverty, women are still not allowed to use bicycles in Pyongyang. In the countryside, though, the ratio of men to women bicycle riders was about even. This was not the result of laxer law enforcement in the countryside but because Pyongyang was supposed to be the developed capital of the revolution with a perfect public transportation system. Bicycles, considered “low-tech,” did not fit well into the picture, and were completely banned until 1992.

  When I asked a senior official of the Pyongyang People’s Committee, the official name for the city government, to explain this ban, he answered that a senior female party official had been killed in a traffic accident while riding a bicycle. Since then, he said, bicycles were considered “too dangerous for the precious lives of our female comrades.”

  This law isn’t necessarily sexist, but has more to do with the low quality of roads. On Pyongyang’s main roads and a few pavements, cycling is also banned for men. The story was a lovely excuse in response to an embarrassing question. In the future when more economic pragmatism will prevail, the likelihood that it is lifted for women as well is high.

  Highways were built during North Korea’s “boom years,” a period before the massive economic downturn in the 1980s and 1990s. The picture shows the highway from Pyongyang heading towards Kaesong and Panmunjom, the de facto border between North and South Korea, on an ordinary weekday, quaint and free of traffic.

  A proletariat subway

  Pyongyangites, without their bicycles, had access to the well developed public transportation system. The Pyongyang bus service was both accessible and cheap, costing 10 Chon, or 1/10 of a Korean Won. With an average monthly salary of 5,000 won (or about $34 at the officially fixed exchange rate, but less than $1 at the black market rate) taking the bus therefore took up less than 1 % of the budget of, say, a family of four that used it twice every working weekday.

  When I first arrived, it was rare to find a bus that traveled between cities; most of the public transportation served mainly Pyongyang. But this scarcity, over the years, was lifted. Mr. Pang, a trade official of a state company who I met to hammer out a business deal, did not show up to an agreed meeting one day. Just over a week later, when I asked him why he didn’t come to the meeting, he answered that he had to go to a funeral in a remote province.

  “How did you get there as I understand there are no buses or trains serving this destination?” I asked.

  “If you have a friend who happens to go there you can go with him,” he answered. “If the company happens to send a vehicle there you may join the vehicle. If not, you look for somebody who will bring you there.”

  “But then you have to pay for the trip?”

  “Of course, many who have a car are ready to bring you anywhere provided it is, moneywise, worthwhile for them.”

  In my later years in North Korea, I noticed that cars, buses and trucks in the countryside were getting even more packed with passengers. The trend was part of a marketing tactic. Drivers and company bosses were looking out for their customers, using their company cars as informal taxis to generate an extra income for themselves and their employer. Government cadres, hoping to make some cash on the side, bought second-hand or even new cars that they registered in the name of their state agency for protection. Some of their profits went to their employer, while they kept the rest for themselves.

  Adding to the positive effects of bicycles on the economy, these informal taxi services allowed businesses to expand: they could move bigger loads and bulkier goods from wholesalers and importers to the retail sellers. A small but increasingly potent entrepreneurial middle class emerged. Despite this development, the
World Food Programme and various NGOs kept renewing their annual warnings of looming food crises, claiming that millions of Koreans faced the threat of starvation. (See chapter 8.)

  Informal taxi trucks carry passengers in wintertime to desired destinations outside Pyongyang.

  While foreigners are for the most part not allowed to use public transportation, they are allowed to take the metro, or subway, for a short distance if they bring along state-sanctioned North Korean guides. That said, I couldn’t hop on the subway to work every morning, but did hear fascinating things about it from my friends. They believed it was the pride and joy of the capital.

  Mr. Kang, an engineer who helped build and maintain the Pyongyang Metro, was sent abroad to observe the subways of other countries. I met him one day at a business meeting. He told me that the Pyongyang Metro is the world’s deepest metro, “which we Koreans built with our own techniques, our own materials and our own efforts under the guidance of our Great Leader. Natural marble and stone of high quality which one can find in abundant quantities in our country were used.” He added that he had seen no other place where such quality building materials and beautiful designs were used.

  “Our president said that we were building a metro not for making money, but to help our people to live a civilized and convenient life,” he explained, “and that to this end we should not spare money and thus constructed the metro in a very solid and modern way, and designed and decorated its inside in a perfect way.”