North Korean leader Kim Jong-il inspects a new shop in Pyongyang in an undated photo distributed by Korea News Service in August 2009. (Korean Central News Agency via Korea News Service/Associated Press) 



North Korea closed down its largest market in June in the Communist government's latest attempt to curb capitalism in the country, a monitoring group in South Korea said Monday.

The market, located in Pyongsong, just outside the capital of Pyongyang, was North Korea's largest by sales and had some 30,000 to 40,000 stalls.

In mid-June, however, authorities closed it and established two smaller markets in nearby districts, according to the Seoul-based Network for North Korean Democracy and Human Rights in a newsletter provided on Monday.

The group cited unidentified people with knowledge of North Korean affairs.

Since closing the market, the government is also watching for people who attempt to sell their goods from their own home, the report said.

Kim Yoon-tae, the group's secretary general, said the move is believed to be an attempt to "control an excessive spread of markets" while still allowing hungry people to find food on their own without having to rely on state-run shops.

South Korean daily newspaper Chosun Ilbo reported in January that North Korean leader Kim Jong-il had ordered a crackdown of street markets and that all manufactured goods and imported items must be sold in state-run shops.

Food crisis plagues N. Korea

The decision to close larger markets and establish smaller ones may be a recognition that the government cannot eliminate markets entirely, because they are needed to supplement the country's central rationing system, analysts said.

"North Korea is in a dilemma," said Kim of the Network for North Korean Democracy and Human Rights. "It does not want markets, but can't get rid of them either."

North Korea has been facing a food crisis since the 1990s, when severe floods led to widespread famine. The United Nations World Food Program estimated that 8.7 million of the country's 22 million people will be in need of food aid in 2008-09.

The country introduced economic reforms in 2002 allowing street and farmers' markets, but scaled back the reforms after they failed to revive the economy.

The report follows news last week that Kim is willing to return to multilateral talks to resolve his country's dispute with the U.S. and regional powers over its nuclear program.

The negotiations, between North and South Korea, the U.S., China, Russia and Japan, are aimed at convincing North Korea to give up its nuclear arsenal and to agree to inspections in return for economic aid and other incentives.

With files from The Associated Press