North Korea has enacted a currency revaluation for the first time in 17 years. China’s Xinhua news agency reported on December 1st that North Korea began issuing new currency starting November 30th and replacing old banknotes with new ones. It was not until the first day of the reform that North Korean residents and foreign embassies were informed of the sudden currency revaluation at the exchange rate of 100 to 1. Four days later, North Korea publicized the new notes and coins through the Chosun Shinbo, a pro-North Korean newspaper based in Japan. Here’s Cho Bong-hyun, researcher of the Economic Research Institute at the Industrial Bank of Korea, to comment on North Korea’s currency reform.

North Korea set the exchange rate as 100 to 1, which is considered a drastic change. Specifics haven’t been revealed yet, but the maximum amount of money that could be converted this way has reportedly been limited to 100-thousand to 150-thousand North Korean won per household. North Korea issued nine types of banknotes and five types of coins. In a change from the past, the 10-thousand won note and the 1 won note are no longer in use. Now, the 5,000 won bill is the highest-denomination banknote in the nation. Designs have been changed in some parts of the new banknotes, with emphasis placed on the blood lineage of former North Korean leader Kim Il-sung and his son and current leader Kim Jong-il.

North Korea has implemented currency reform four times thus far. Previously, the nation officially proclaimed its monetary reform. But this time, the reform measure came so abruptly that North Korean society was plunged into total chaos. State-run shops in downtown Pyongyang stopped operating simultaneously, and prices of rice and corn have soared because citizens are rushing to secure food and goods instead of money. Those who had stashed large sums of money were shocked by the measure, as savings that surpass the exchange limit of 150-thousand won will essentially turn into mere scraps of paper. So, why did North Korean authorities suddenly push for the currency reform without any prior notice?

The currency revaluation has various purposes. The main purpose is to curb galloping inflation. Industrial output is inadequate in North Korea, since the number of companies and factories is restricted. The closed economy in the communist nation also puts limitations on importing goods from overseas. In the wake of a nuclear test, North Korea has been under international sanctions, which have isolated the country even further. But North Korean citizens still have to meet their basic needs, resulting in skyrocketing prices. The latest currency reform is aimed at bringing runaway inflation under control. Also, many North Koreans hide their money at home for fear that the source of income might be disclosed. As a result, currency in North Korea fails to function properly, and the nation suffers from poor monetary circulation, which also has a detrimental effect on the economy and industry. The currency revaluation is equally aimed at tackling this situation.

Some speculate that the currency reform extends beyond a mere monetary policy; that it’s a political ploy that mirrors the complicated power structure inside the North Korean leadership. The North Korean government says laborers and office workers will be paid at the previous level, in new banknotes, despite the fact that the move will inevitably cause inflation. Given this development, some experts suspect that the latest currency reform targets the emerging rich class that has accumulated wealth with old money. They say North Korea uses the reform as a means to eliminate the potential capitalist group that could threaten the communist regime in order to solidify internal unity or establish the foundation for power transfer. So, how will the monetary reform influence relations between South and North Korea and bilateral economic cooperation? According to Mr. Cho, the outlook isn’t very bright.

North Korea will seek economic cooperation with the South only when its society becomes stable again. If the internal confusion continues, the North Korean leadership may feel burdened about engaging in economic exchanges with South Korea. It will then become increasingly reluctant to do so. When it comes to the revalued North Korean currency, I don’t think it will have a significant impact on joint economic programs, including the Gaeseong industrial park business, since the settlement currency is the U.S. dollar. But the problem is how to apply the foreign exchange rate to the new currency. Also, the currency revaluation at the rate of 100 to 1 should lead to a fall in prices at the same rate, but I don’t anticipate such a drastic plunge in prices. North Korean laborers working at the Gaeseong industrial park may see their income reduced relatively, due to the rising inflationary pressure. Therefore, North Korea could request a wage hike as a way of protecting their livelihood. The North may also demand that South Korean companies involving processing-on-commission trade in the North purchase raw materials at higher prices.

Amid a series of media reports about social confusion in North Korea caused by currency revaluation, the South Korean government is keeping a close watch on any changes in the communist neighbor. An official says the government is trying to figure out the North Korean situation by mobilizing all possible means and channels available, although the government has its own limits in discovering what’s happening inside the reclusive nation. Diplomatic experts stress that the Seoul government must come up with proper measures to prevent internal confusion in North Korea from spreading to inter-Korean relations.

Hardliners in the North Korean military could create tension temporarily in order to quell public jitters triggered by currency reform. The South Korean government should brace for this possibility. North Korea is also likely to demand higher wages for North Korean workers at the Gaeseong industrial park and ask South Korean processing-on-commission businesses to raise material prices. South Korea, based on strict principles, needs to make it clear that it cannot accept such requests which are aimed at containing fallout from the North’s internal policy. Some South Korean manufacturers in Gaeseong aren’t quite sure how to respond to the North’s monetary reform. The government must help them recognize the possible repercussions of the measure correctly.

Experts are carefully watching how long the storm of backlash from the currency reform may continue and how it will influence the North Korean economy. The currency reform should be completed quickly and stably so it won’t affect the North Korean economy and the diplomatic situation surrounding the Korean Peninsula.


[Interview] Matchmaking Company for N. Korean Women Defectors
Employees of a matchmaking company, located in Hwagok-dong in western Seoul, are busy answering phone calls. The main task of this marriage information center is to arrange a match between South Korean men and North Korean female defectors, as the name of the center “Marriage Consulting for South Korean Men and North Korean Women” indicates. In fact, more and more couples have tied the knot in this way, since the number of women defectors from North Korea began to rise sharply in the early 2000s. According to the Unification Ministry, 2,800 North Koreans defected to South Korea last year alone, and the number of female defectors doubles that of their male counterparts. Choi Young-hee, representative of this matchmaking company, is a North Korean newcomer herself. In the beginning, she would introduce a few North Korean expatriates to her South Korean acquaintances. But the simple matchmaking has eventually developed to this business.

I came from Pyongyang in 2002. After I arrived in South Korea, many people tried to fix me up on blind dates. But I didn’t think I had to rush into marriage. Instead, it came to me that I could introduce my acquaintances to one another. There were many matchmaking companies, both domestic and international, but most North Korean defectors got married through individual matchmakers, although the number of such defectors had already surpassed 10-thousand. It was hard to confirm the identities of the would-be husbands or wives, and in that process, some unfortunate people met inappropriate spouses. So I decided to introduce people who I was really familiar with to one another. The result was good, and many couples live happy lives. I officially started this matchmaking business in 2005 and I’m still working on it.

At first, Ms. Choi was concerned about whether married couples from different political backgrounds could lead a happy life. In spite of those worries, many North Korean women who’ve married South Korean men have adjusted to South Korean society easily, overcoming the cultural difference naturally. North Korean wives find their South Korean husbands attractive, since they are more attentive and devoted to their family, compared to North Korean men. South Korean husbands, for their part, think North Korean women are pure-hearted and strong enough to earn their living. That explains why many South Korean men are looking for women from North Korea.

North Korea claims men and women are equal, but in reality, men are considered far superior to women in the North. Here in South Korea, many husbands help their wives wash dishes and clean the house. I’ve never seen that in North Korea. Little wonder women defectors favor South Korean men for their spouses. They risked their lives to come to South Korea. So they want their spouses to be considerate, understanding and kind. An increasing number of South Korean men from diverse age groups, from those in their early 30s to the mid-40s, are looking for women from North Korea. Their occupations also vary, ranging from public officials to office workers and businessmen. They suspect that North Korean women are more innocent and pure.

It’s been four years since Ms. Choi launched the matchmaking business. Some 380 couples have been matched since then. Currently, nearly 20 people seek counseling at this marriage information center every month. The business has now taken firm root, thanks to Choi’s heartfelt connection with North Korean women defectors. She’s willing to have a heart-to-heart talk with her fellow defectors as sisters. She feels most rewarded when newcomers, having crossed the “line of no return” in search of freedom, marry good spouses and build happy families.