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North Korean County Leases Rationing Center to Wealthy Wholesaler

2020-08-24 -- A county government in North Korea's South Pyongan province is leasing out an obsolete public food distribution center to a wealthy entrepreneur, turning a building that would otherwise be shut down into money-generating commercial real estate, local sources told RFA.

The centers once provided food to North Korea's non-farming population, but now the local government in the province's Songchon county is collecting rent on one such center instead of allowing it to fall derelict.

"These days, a state-run food distribution center in Songchon County, South Pyongan Province, has become a wholesale supplier to local market merchants with various grains, including rice and corn," a resident of the province, who requested anonymity to speak freely, told RFA's Korean Service Saturday.

"Since last month, a rich lady in Songchon County has been renting the whole food distribution center building and is using it as a wholesale rice store," the source said.

Under North Korea's centrally planned communist economy, farmers in rural areas surrender part of their production to the public distribution system (PDS), which then rations it out to the people–at least, this was the system in place until it collapsed during the 1994-1998 North Korean famine.

For months-long stretches of 1998 and 1999, the PDS stopped delivering even greatly reduced rations, leaving the people to fend for themselves. Millions are believed to have died from starvation.

The PDS made a slight recovery by the 2010s, but stored grain was only supplied to workers of specific industries, and most of the population now acquires food through the country's nascent market economy.

In some cases, the government sells grain at state-run stores to the people it once used to provide rations to, but supply problems are often an issue, so much of the country's food is imported from China.

After North Korea and China suspended trade in January on coronavirus concerns, the government began telling industries to solve their own food distribution needs, making the distribution centers completely obsolete.

This is why it made more sense for Songchong County to rent the center, even to someone who would become a competitor in selling food to the public.

"Songchong County has been operating a food store that has been selling at market prices for several years. It belongs to the commercial department of the people's committee of the county," said the source.

"The rich lady rented the food distribution center and opened her wholesaling business in direct competition with the nearby Songchong County food store," the source added.

Though the county store and the private wholesaler are selling at nearly the same price, the renter's contract ensures she and the government make a hefty profit, while also making more rice available to the public.

Rice wholesalers are able to purchase and import rice from China using their connections and resources, whereas the government only has access to the domestic rice crop. The arrangement in Songchon county ensures that the county collects rent and a percentage of profit.

"The price of rice sold at the county's store is 4,150 North Korean won (U.S. $0.52) per kilogram (2.2 lbs), and it's about 4000 to 4100 won ($0.50-0.51) per kilogram at the rented distribution center store," the source said.

"The prices at both stores are not that much different, but she's actually making much more if you look at actual earnings. Most of the profits at the county store must be deposited in local government funds, but the private rice wholesaler needs only to deposit 30 percent of her profits to the government's food distribution funds, and she gets to keep the rest," said the source.

Another South Pyongan resident told RFA on Sunday that the distribution centers had been in decline since the PDS' near demise.

"When the food rationing system collapsed, the national food distribution centers in some parts of South Pyongan were converted to food stores or closed down," the second source said.

"'The authority of the food distribution center' used to be very powerful when food rationing was still a thing, but that's an outdated expression now," the second source added.

Since the collapse, the food distribution centers in South Pyongan had been supplying grain only to workers of specific essential industries, but now even they are closing up.

"Songchon's Factory No. 69 [Biryugang Electric Factory] and Plant No. 24 produce military supplies like electronic circuits and military-grade batteries. There are also other munitions factories there, but only a few state-run food distribution centers were supplying these factories," the second source said.

"These food distribution centers are all closing now because they have nothing to do. Because of the sharp decline in food imports this year due to the coronavirus crisis, the Central Committee [of the Korean Workers' Party's] ordered munitions plants to solve their food distribution problems on their own, in the spirit of Juche," the second source said, referring to North Korea's founding philosophy of self-reliance.

The wealthy woman saw the closures as an opportunity, according to the second source.

"When she noticed that the center would shut down, she signed a contract to rent the center because it was a good location. She agreed to give some of the profit from her wholesale rice store to the authorities, while the rent goes to the Food Administration office," the second source said.

In addition to rice sales, the wealthy renter is entitled to profits made on the center's storage capacity.

"There are many trading companies in Songchon County that might be in the business of smuggling things from China. They sometimes store hundreds of tons of food in the distribution center's warehouse," the second source said.

"Previously, warehouse rent was paid to the person in charge, but now they have to pay it to the rich renter."

Reported by Hyemin Son for RFA's Korean Service. Translated by Leejin Jun. Written in English by Eugene Whong.

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