North Korea relaxes free market restrictions

From: BBC World News | Feb. 05, 2010

Increasing social unrest has led North Korea to ease restrictions on private markets, say reports.

The move follows a recent currency revaluation which wiped out many cash savings in the country.

The revaluation appears to have been an attempt by North Korea's leaders to reassert control over the economy.

But correspondents in South Korea say allowing markets to operate more freely may be the only way for many in the North to feed themselves.

A spokesman for South Korea's National Intelligence Service (NIS) said signs of an easing of restrictions had been detected "in various places".

The authorities "may not have been able to keep ignoring people's demands," the spokesman told the AFP news agency.

The BBC's John Sudworth in Seoul says the traders and smugglers who manage to cross North Korea's tightly-sealed border with China have reported runaway inflation, food shortages and civil unrest in recent weeks.

Organisations with contacts in the North saying some people had attacked security agents patrolling markets.

The unrest followed a 30 November decree that old North Korean banknotes would be swapped for new ones at a rate of 100 to one.

The amount of currency people were allowed to exchange was reportedly restricted, and any cash held above that became worthless - effectively wiping out some people's savings.

Control attempt

The revaluation also led to spiralling inflation.

According to traders quoted in the South Korean newspaper Chosun Ilbo, $1 fetched 98 won at the beginning of the revaluation whereas it is now worth between 300 to 500 won.

On Wednesday, South Korean media reported that a top North Korean finance official had been sacked over the chaotic move.

Pak Nam-Ki, the Communist Party's director for planning and finance, had reportedly been absent from public activities since early January.

North Korea introduced limited market reforms in 2002, which allowed people to buy and sell goods at free markets.

These markets have become increasingly important to ordinary North Koreans, with a wide range of goods on offer, such as imported fruit, clothes and electronics unavailable in state shops.

Some analysts say the main reason for the currency revaluation was rein in the newly emerging middle class, many of whom have made their money trading in the free markets.