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The Peninsula

North Korea’s Choco Pie Economy

Published November 22, 2011
Category: Inter-Korean

By Troy Stangarone

Years ago, The Economist developed the Big Mac Index to track how much a MacDonald’s Big Mac cost in countries around the world. The idea was to provide an understandable measure for purchasing power parity across countries since the Big Mac is a basic commodity that has spread across the world. Of course, there are no MacDonald’s in North Korea and statistics on economic activity are often hard to come by or have to be inferred by data reported from foreign countries that trade with North Korea. However, some recent reporting might point the way to a commodity that could at least signal the direction of economic developments in North Korea – the Choco pie.

About a month ago, the Chosun Ilbo reported that North Korea had asked South Korean companies working in the Kaesong Industrial Complex to stop giving its workers Choco pies and that daily consumption in the Complex had dropped from 200,000 to below 150,000. The pies are not only a big hit among North Korean workers, but also on the North Korean black market. Reporting indicates that the pies go for about 100 grams of rice in open air markets and that a year ago they were worth about $9.50 on the black market where 2.5 million pies may be traded a month. The trade has become so successful, that some traders only deal in the pies.

Now comes word that Choco pies may also be becoming a way for companies in the Kaesong Industrial Complex to provide their workers with a benefit beyond their salaries. It has long been known that the companies provided their North Korean workers with extra food that they could take home to their families, hence how the Choco pie craze began. But now it seems that the amount of pies given to workers by companies varies and that they try to outdo each other in the amount of pies they give to workers. This means that companies have found a way to basically vary compensation to workers in terms of salary and benefits, even if the North Korea state still assigns workers and sets wages through agreements with the South Korean government. The immediate impact of this of course is to maintain morale at individual plants, but at the same time it’s beginning to set a precedent for the future competition between companies for workers in the Complex based on wages, benefits, and skills.

North Korea seems concerned enough about the popularity of the pies and these developments that it has asked companies to either provide other types of food or cash instead. The companies so far have declined to do so. Given the spread of the pies across North Korea, perhaps it’s time to consider developing a Choco Pie Index for North Korea to track what is becoming one of the most popular mediums of exchange in the country?

Troy Stangarone is the Senior Director for Congressional Affairs and Trade for the Korea Economic Institute. The views expressed here are his own.

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