Is North Korea’s food situation really getting worse? The markets don’t think so.

July 22nd, 2016

By Benjamin Katzeff Silberstein

Since early 2016, the Food and Agriculture Organization of the UN (FAO) has been sounding the alarm bells on North Korea’s food situation. In an interview a few weeks ago with Voice of America’s Korean-language edition, FAO-official Christina Cosiet said that this years’ harvest would be the worst one in four years. One question, dealt with before by this blog, is how bad this really is. After all, the past few years seem to have been abnormally good in a long-run perspective.

But another obvious question is: why do market prices in North Korea tell the opposite story about food supply?

Prices for both rice and foreign currency (US-dollars) have remained remarkably stable for a situation where people should be expecting a worse-than-usual harvest. It is important to bear in mind that prices are largely seasonal and tend to increase in September and October. But unless prices somehow skyrocket in a couple of months, things do not look that bad.

There seem to be two possibilities here: either official production and food supply through the public distribution system simply does not matter that much, because shortages are easily offset by private production and/or imports. Or, the FAO projections simply do not capture North Korean food production as a whole.

For an overview of food prices in the last few years, consider the following graph (click here for larger version):

graph1

Graph 1: Prices for rice and foreign currency, in North Korean won. Prices are expressed in averages of local prices in Pyongyang, Sinuiju and Hyesan. Data source: DailyNK market prices.

As this graph shows, both the exchange rate and rice prices have remained relatively stabile over the past few years. Thus far, this summer has been no exception. The following graph shows exchange rates and rice prices from the spring of 2015 till July 2016 (click here for larger version):

graph2

Graph 2: Prices for rice and foreign currency, April 2015–July 2016, in North Korean won. Prices are expressed in averages of local prices in Pyongyang, Sinuiju and Hyesan. Data source: DailyNK market prices

This does not look like the behavior of a nervous market where supply is declining at a drastic rate. Of course, a number of caveats are in order: again, prices are likely to rise through September and October, as they have in the past. Moreover, markets may react to any harvest declines at a later point in time, as they become more apparent.

Even so, it seems inconceivable that market prices would remain so stable if North Korea was experiencing a steep dive in food production. After all, farmers would be able to see signs fairly early on, and their information would presumably spread through the market as a whole. In short, it is logically unthinkable that markets simply would not react to an unusually poor harvest.

This all begs the question of how much market prices tend to correlate with the FAO:s harvest figures overall. The short answer appears to be: not much. The graph below (click here for larger version) shows the average prices for rice and foreign exchange per year on the North Korean market since 2011, and harvest figures drawn from reports by the FAO and the World Food Program (WFP). (See the end of this post for a more detailed explanation of the underlying calculations.)*

graph3

Graph 3: Yearly average market prices for rice and US-dollar (in North Korean won), and FAO food production figures. Data source: DailyNK market prices

As this graph shows, there is generally fairly little correlation between market prices and harvests as calculated by the FAO. Harvests climbed between 2009 and 2015, while market prices climbed and and flattened out from 2012, around the time of Kim Jong-il’s death. Exchange rates and rice prices unsurprisingly move in tandem, but appear little impacted by production figures as reported by the FAO.

It is possible that prices react in a delayed manner to harvests, and that the price stabilization on the market is a result of increased harvests over time. But the consistent trend over several years, with prices going up as harvest figures do, is an unlikely one. Again, it is also difficult to imagine market prices not reacting relatively quickly to noticeable decreases in food production.

So what does all this mean?

It is difficult to draw any certain conclusions. But at the very least, these numbers suggest that the FAO food production projections are not telling the full story about overall food supply in North Korea. Moreover, market signals are telling us that food supply right now is far from as bad as the FAO’s latest claims of lowered production would have it. Rather, prices seem normal and even slightly more stabile than in some previous years with better harvests. In short, the narrative that this year’s harvest is exceptionally poor seems an unlikely one.

 

*A note on graph 3:

 For market prices per year, I calculated an average price from all observations in a given year. The DailyNK price data is reported for three cities separately: Pyongyang, Sinuiju and Hyesan. I have used an average of these three cities for each data observation as the base for calculating yearly averages. This is a somewhat tricky way of measuring, as the amount of data observations, as well as their timing, sometimes varies from year to year. The steep decline in 2009–2010 is primarily caused by the currency denomination, and should not be taken for a real increase in supply.

The FAO food production figures are not reported by calendar year, but published in the fall and projected for the following year. Since these figures best indicate available supply for the year after they are reported, I have assigned them to the year following the reporting year. That is, the figure for 2014 comes from the WFP-estimate for 2013/2014, and so on and so forth.

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Bank of Korea estimate of North Korean economy in 2015 published

July 22nd, 2016

I have added the report to my DPRK Economic Statistics Page. You can download the PDF here.

The Bank of Korea claims the DPRK economy shrank in 2015 by 1.1%

This number has numerous drawbacks which I have discussed before.

According to the Yonhap:

North Korea’s economy is estimated to have contracted 1.1 percent last year amid negative growth in most industries, South Korea’s central bank announced Friday.

The Bank of Korea (BOK) has issued an annual report on the estimated gross domestic product (GDP) of one of the world’s most secretive nations.

It said the communist country’s GDP shrank 1.1 percent in 2015 from a year earlier, the first negative growth since 2010.

The bank cited a drop in crop and mining output by 0.8 percent and 2.6 percent, respectively.

The manufacturing sector suffered a 3.4 percent decline. The electricity, gas and tap water business also tumbled 12.7 percent due to a fall in hydroelectric power production attributable to a drought, according to the BOK.

But the construction field posted a 4.8 percent rise, and the service sector grew 0.8 percent.

The North’s mining and manufacturing industries accounted for 32.7 percent of its GDP, down 1.7 percentage points from 2014.

The BOK put the North’s gross national income (GNI) at 34.5 trillion won ($30.3 billion), 45 times less than that of South Korea. The North has around 25 million residents, half of the South’s population.

The data also showed that the North’s trade volume totaled $6.25 billion, down 17.9 percent on-year.

Exports slipped 14.8 percent to $2.7 billion, and imports shed 20 percent to $3.56 billion.

The North is under heavy U.N.-led economic sanctions for its nuclear and missile activities.

Since no accurate economic data from North Korea are available, the BOK said the statistics are based on estimates using methodologies applied to gauge South Korea’s own economy. Thus, it’s not desirable to directly compare the data with those of other foreign nations, added the bank.

Here is coverage in the Wall Street Journal:

North Korea’s economy likely shrank last year for the first time in five years, South Korea’s central bank said, potentially increasing the ruling challenge for leader Kim Jong Un, who has promised to boost prosperity while confronting the U.S. and other nations with nuclear weapons.

The Bank of Korea said Friday that it estimated North Korean gross domestic product fell 1.1% in 2015, the first decline since 2010 and the largest fall since a 1.2% contraction in 2007.

North Korea doesn’t release official statistics or allow outsiders to make assessments of its economy from within the country. As a result, the BOK’s estimate of North Korean GDP is often cited as the best guess. It bases its calculations on information from Seoul’s spy agency and other authorities that study North Korea.

The biggest recent economic setback for North Korea has come from a sharp fall in the price of coal, its main export product, and a slowdown in China, its sole major trading partner. The South Korean central bank said the North’s external trade was valued at $6.25 billion in 2015—down 18% from a year earlier.

New international sanctions on North Korea following its nuclear bomb test in January this year and long-range rocket launch in February may increase the economic pressure on Pyongyang. For the first time, United Nations sanctions target North Korea’s commodities trade, while the U.S. has sought to cut off Pyongyang’s links to the international financial system.

North Korea insists it will continue to pursue twin policy priorities of nuclear weapons development for its defense while seeking to boost its economy. In his first speech in 2012, Mr. Kim said North Koreans should “not have to tighten their belts again” and has regularly visited economic projects such as factories and farms.

However, output in nearly all North Korean industries contracted last year, including agriculture, fishing, mining and energy, the South Korean central bank said in its report.

Construction was a rare bright spot, growing an estimated 5%, as Mr. Kim has pursued the redevelopment of areas of central Pyongyang, including major new housing projects. The Bank of Korea also estimated a 0.8% increase in service-sector output, reflecting the emergence of unofficial market trading and underground financial services.

The North’s per capita income was around $1,224 in 2015, the bank said, compared with South Korea’s $27,200.

Here is coverage in Reuters:

North Korea’s economy contracted in 2015 at the sharpest pace in eight years, an estimate from the Bank of Korea showed on Friday, as low global commodity prices landed a blow to exports, a key driver for the impoverished country’s economy.

The gross domestic product in North Korea last year fell a real 1.1 percent, South Korea’s central bank said, which was the first fall since 2010 and compares with a 1.0 percent gain in 2014. It also marked the fastest decline since a 1.2 percent drop in 2007.

Isolated North Korea does not publish economic data.

All sectors except construction and services declined, a likely burden for North Korean leader Kim Jong Un already under pressure from international sanctions against multiple provocations including a nuclear test in January.

“The key reason for the GDP contraction looks to be trade as global commodity prices fell while China demand also declined,” said a Bank of Korea official, who declined to be named as he was unauthorized to speak to media.

“North Korea’s main commodity exports are coal and iron ore, which likely all declined last year.”

Neighboring China is North Korea’s chief trading partner.

The Bank of Korea data showed exports in North Korea fell 14.8 percent last year in annual terms as mineral product shipments slumped 14.7 percent. This was far worse than a 1.7 percent decline seen in 2014.

Imports dropped a faster 20.0 percent last year, compared with a 7.8 percent increase in 2014.

The central bank official said trade is expected to worsen this year as it becomes difficult for North Korea to boost shipments with other countries with international sanctions likely to grow heavier following Pyongyang’s continued missile launches and nuclear threats.

Construction rose 4.8 percent last year, accelerating from a 1.4 percent gain in 2014, the same data showed.

Meanwhile, a 0.8 percent gain in services last year reflects North Korea’s economic shift towards capitalism as the black market there has become more pervasive. Financial services have also grown, which likely contributed to the gain, the BOK official added.

The Bank of Korea has released GDP data on North Korea every year since 1991 based on information received from related sources, including the Ministry of Unification.

Here are comments by Marcus Noland.

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KWP cadres and the donju

July 8th, 2016

By Benjamin Katzeff Silberstein

Some interesting snippets of practical political economy in North Korea, from DailyNK:

It seems like cadres are quite accustomed to watching each other’s backs like this. I’m curious now if there are any other arrangements that follow this pattern.
Absolutely. Cadres don’t engage in this kind of relationship exclusively with one another. The current trend is for cadres to engage in all-ssam with the donju (North Korea’s rising entrepreneurial class). But North Koreans don’t refer to close relations between ordinary people as all-ssam relationships. That being said, I’d like to explore the all-ssam culture that links cadres and the donju a bit more deeply.
In South Korea we’d call these kind of relations between government officials and business leaders as either unhealthy or flat-out collusion. I’m curious how the all-ssam relationships in North Korea break the standard political mold to create new power sharing arrangements. 
One example of how this relationship gets put into action concerns the state factories. The donju rent this space out from the cadres to make their products. But leasing the space requires more than money. To get the space, it’s also necessary to have a relationship with the managing cadres. The donju in South Pyongan Province have gotten quite cozy with the cadres there. The monthly building rental fee issued to the cadres becomes a form of profit for them.
Although this may seem like an illicit affair, the Party secretary affiliated with the factory knows about this. In fact, the secretary encourages ‘extra earnings’ through official orders. ‘Extra earnings’ refers to any profits made by the state factories that do not come from the use of raw materials and labor for the productions of goods for sale.
Moreover, the donju do not merely contribute some of the profits. They also issue a per diem including living expenses to the manager. This is a voluntary donation, and the manager usually responds by scratching the donju’s back in the form of providing extra factory facilities or making things more convenient for them. For example, in return for a per diem, a factory manager might issue an order to let the donju use a state vehicle to transport products to the market.
Seeing this, the Party secretary began to fear that his authority was becoming eclipsed by that of the managing cadres. He became worried that his title was strictly nominal and that he wielded little actual power. That’s why he began to grab up donju and bring them into all-ssam relationships with him. Those that didn’t enter into the relationship were cast out of his good graces. The more prosperous the donju, the bigger the problem for the cadres.
Full article here:
The complex ties interlinking cadres and the donju
Daily NK
2016-07-08
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Buy your own North Korean coal, through Alibaba

June 30th, 2016

By Benjamin Katzeff Silberstein

Are you looking for the perfect birthday present or anniversary gift for your loved one? Look no further. It seems you can buy your own North Korean coal through the Chinese shopping website Alibaba.

One company, Dandong Zhícheng Metallic Material, states: “We are professional company of trading the North Korea Briquettes, choose us, trust us.” Buyers can choose to have their coal transported either through the Dalian or Dandong ports, and the company markets both coal briquettes and other types of coal products. The website contains information about the country and their products in both Chinese and Korean, but the text is blurry and appears in a small font, making it difficult to read. I am currently unable to find the original page where these descriptions appear, but below are a few screenshots:

Screen Shot 2016-06-30 at 22.05.17Screen Shot 2016-06-30 at 22.05.31Screen Shot 2016-06-30 at 22.05.52 Screen Shot 2016-06-30 at 22.06.14Screen Shot 2016-06-30 at 22.06.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Update 2016-07-03:

Voice of America (Korean version) cites this blog post here, and Yonhap in turn cites VoA here, without citing this blog.

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DPRK – China Trade in 2016 (UPDATED)

June 22nd, 2016

UPDATE 5 (2016-06-22): China’s imports of North Korean goods fell 12.59 percent on-year in May

By Benjamin Katzeff Silberstein

Says Yonhap, citing KOTRA data:

China’s imports of North Korean goods fell 12.59 percent on-year in May, data showed Wednesday, amid tougher U.N. sanctions against Pyongyang’s nuclear weapons and missile programs.

Imports from North Korea declined to US$175.6 million last month, compared to $200.9 million for the same month last year, according to Chinese customs data compiled by the Beijing unit of South Korea’s Korea Trade and Investment Promotion Agency (KOTRA).

Imports of North Korean coal, which accounts for nearly half of the North’s annual exports to China, plunged 28.3 percent on-year to $74.7 million in May, the data showed.

China’s exports to North Korea also fell 5.9 percent on-year to $239.3 million last month, according to the data.

However, these numbers suffer from the same problems that often plague trade data on North Korea. We don’t know 1) how much of the decrease is caused by a general, global drop in world market prices for North Korea’s export goods, and how much is an actual, quantitative import decrease, and 2) how much of the drop would have counterfactually happened “anyway,” given the contraction of Chinese industries using North Korean coal.

Full article:
China’s imports of N. Korean goods fall 12.6 pct in May 
Kim Deok-hyun
Yonhap News
2016-06-22

UPDATE 4 (2016-6-3):  The Institute for Far Eastern Studies (IFES) also comments on the April 2016 trade statistics.

China Decreased Imports from North Korea in April by 22.3 Percent

Last month, imports from North Korea to China plunged more than 20 percent below that of the same period last year. April is the first month for China to begin the implementation of sanctions against North Korea adopted by the UN Security Council resolution. China’s sanctions against North Korea have a notable effect.

KOTRA Trade Office in Beijing released the official DPRK-China trade statistics of Chinese Maritime Customs Service on May 14. According to this report, China’s total import volume from North Korea in this period recorded 161,380,000 USD, down 22.35 percent compared to April last year. By item, imports of coal decreased by 38.34 percent while lead imports were reduced by 16.12 percent. There were no titanium imports as China listed titanium as one of the banned exports from North Korea.

However, iron ore is one of North Korea’s main export items along with coal. Unlike lead and coal, the import of iron ore increased 19.38 percent, and zinc import jumped a whopping 685 percent. In this regard, China appears to have decreased coal imports to deal with domestic overproduction problem of coal while increasing the imports of other minerals and under the suspicion that it is imposing sanctions on North Korea only on the outside.

China’s exports to North Korea recorded insignificant decrease of approximately 1.53 percent, with a total volume of 268,000,000 USD. Refined oil including jet fuel was identified to have decreased 6.11 percent compared to the same period last year. Exports of freight cars and electronic equipment decreased 45.46 percent and 43.95 percent, respectively, while agricultural and clothing items were not much affected.

As a result, the total of DPRK-China trade volume decreased 10.54 percent compared to last year, at 429,410,000 USD. Last month on April 5, China’s Ministry of Commerce announced 25 banned items of import and export to and from North Korea. This is about a month since the resolution on North Korean sanctions was passed. Since then, China immediately began to impose sanctions.

In the list of import bans, there are a total of 20 items, including coal, steel, and iron ore, along with gold, titanium, vanadium ore and other rare earth minerals as classified by maritime customs. Prior to the sanctions, DPRK-China trade in March recorded 490,000,000 USD in trade volume, which was an increase of approximately 20 percent compared to the previous year.

As China continues to impose sanctions on North Korea, North Korea can be expected to suffer a significant setback in its foreign currency earnings.

UPDATE 3 (2016-5-25): DPRK – China trade Jan 1 – April 30 2016:

Preliminary estimates of trade volume between DPRK and China through April 30 total appx $1.597 billion ($4.791 annualized, 11.7% decrease from 2015).

DPRK imports/Chinese exports total $862 million, and DPRK exports/Chinese imports total $735 million. So we can see a bilateral trade deficit in Jan-April 2016 of appx $127 million ($381 million at annualized rate vs $460 million in 2015).

Chinese enforcement of UNSC Resolution 2270 reportedly began in April, in which China reports it’s DPRK imports total US $161 million (down 22.3% from April 2015). Coal imports at $72.2 million (down 38.2% from April 2015 total of $116.6 million), gold imports $250k (down 91.1% from April 2015). China’s exports total $268 million in April 2016 (down 1.5% from April 2015).

It is impossible to tell from this data whether the sanctions are having any impact beyond the general downturn in the Chinese economy because this is trade based on value (Price x Quantity), and prices of North Korea’s commodity exports have been falling as well. We need to compare the quantity of the prohibited mineral exports over time to see if the sanctions are having any impact (assuming China is accurately reporting them).

It is also important to remember that DPRK – China trade is not regular, so past performance is not necessarily indicative of future results. Also, the data can be revised for numerous reasons.

Finally, China stopped reporting unrefined oil exports to the DPRK in 2014, but they did not stop exporting unrefined oil itself. According to Chinese customs data, the country exported about 520,000 tons of oil to North Korea every year from 2009 to 2012. Beijing normally supplied between 30,000 to 50,000 tonnes (222,000 to 370,000 barrels) of crude oil to North Korea every month. Shipments of crude oil to North Korea rose 11.2% to 578,000 tons in 2013.

The data in the above summary comes from the articles below, starting with this in the Choson Ilbo:

China’s imports of North Korean products declined more than 20 percent last month compared to the same period of 2015 as Beijing began to implement UN Security Council sanctions against Pyongyang.

According to statistics by the Korea International Trade Association, China imported US$161 million worth of North Korean products in April, down 22.3 percent on-year.

Its imports of North Korean coal fell 38.2 percent to $7.21 million [this statistic is wrong and was corrected by Yonhap], and of gold 91.1 percent to $250,000. Imports of North Korean titanium, which is on the list of banned imports, were zero.

But imports of iron ore, which is allowed since it is thought to support the livelihood of ordinary North Koreans, increased 1.7 percent, and of zinc, which is also not banned, a whopping 685 percent to $5.7 million.

China’s exports to North Korea totaled $268 million last month, down 1.5 percent. Sales of jet and rocket fuel dropped 39.9 percent and of cars and electronic equipment 45.5 percent and 43.9 percent.

Total trade between North Korea and China last month fell 10.5 percent on-year to $429 million. If China continues to abide by UN Security Council sanctions against North Korea, bilateral trade will shrink further and dent the North’s attempts to earn hard currency.

North Korea’s state-run Rodong Sinmun daily on Tuesday complained that the sanctions are pressuring the North “beyond imagination.”

Read the full story here:
Sanctions Slash Chinese Imports of N.Korean Products
Choson Ilbo
2016-5-25

UPDATE 2 (2016-5-23): Reuters reports a drop in Chinese imports of North Korean coal:

China’s imports of coal from its neighbor North Korea reached 1.53 million tonnes in April, down 35 percent on the month and 20.5 percent year-on-year as Beijing sought to comply with a tougher sanctions regime against the country.

North Korean shipments over the first four months of the year remain 23.2 percent higher than the same period of 2015, data from China’s General Administration of Customs showed on Monday.

China’s Ministry of Commerce announced at the beginning of April that it would ban North Korean coal imports to comply with new United Nations sanctions on the country, though it made exceptions for deliveries intended for “the people’s wellbeing” as well as coal originating from third countries like Mongolia.

Mongolia was the chief beneficiary of the decline in shipments from North Korea, with the country supplying 1.98 million tonnes to China in April, up 34.7 percent on the year.

Australia remained China’s biggest supplier, though the April volume of 5.74 million tonnes was down 12.9 percent compared to last year.

Read the full story here:
China coal imports from North Korea dip 35 percent as sanctions bite
Reuters
2016-5-23

UPDATE 1 (2016-4-14): Yonhap reports on Q1 2016. Overall trade is up, but this is composed of surging Chinese exports to North Korea and falling imports. Here are the relevant parts of the report:

Trade volume between North Korea and China posted double-digit growth in the first quarter of 2016 from a year earlier despite the United Nations’ punitive economic sanctions imposed on the reclusive country, official data showed Wednesday.

The size of bilateral trade stood at 7.79 billion yuan (US$1.2 billion) in the January-March period, up 12.7 percent from the same period last year, Huang Songping, spokesman of China’s General Administration of Customs, said during a press briefing on the country’s first-quarter trade outcome.

The increased trade volume is attributable to a sharp rise in China’s exports to North Korea in the three months, which posted 14.7 percent growth to 3.96 billion yuan, according to the spokesman.

On the other hand, China’s imports from North Korea contracted 10.8 percent to 3.83 billion yuan, he said.

“Major Chinese exports to North Korea are machinery, electronic goods, labor-intensive products and agricultural goods, while imports mainly are coal and iron ore,” Huang said.

The spokesman indicated that the trade increase should not be viewed as China circumventing the U.N. Security Council sanctions because the latest figure accounts for bilateral trade volume before the sanctions took effect.

China immediately implemented the sanctions after it announced a list of banned trade goods with North Korea on April 5, the spokesman pointed out.

“The China-North Korea trade data for the first quarter has nothing to do with anti-North sanctions,” the official said, also vowing to “follow through with the U.N. sanctions resolution thoroughly.”

Another official from China’s State Council stressed any trade items that concern the public welfare or have no link to North Korea’s nuclear weapons development are not subject to the sanctions.

But the official refused to release the monthly trade figure for March, only saying that the monthly data is not available.

In early March, the U.N. adopted the toughest sanctions it has ever slapped on North Korea as punishment for the communist country’s defiant nuclear test in January and a long-range rocket launch in February.

Read the full story here:
N. Korea-China trade volume up 12.7 percent on-year in Q1
Yonhap
2016-4-13

ORIGINAL POST (2016-4-7): The Chinese Ministry of Commerce issues announcement on trade and UNSC Resolution 2270:

MOFCOM Announcement No. 11 of 2016 Announcement on List of Mineral Products Embargo against the DPRK
April 7, 2016 – 10:57 BJT (14:57 GMT) MOFCOM

In order to carry out relevant resolutions of the UN Security Council and in accordance with the Foreign Trade Law of the People’s Republic of China, the following products are hereby embargoed against the Democratic People’s Republic of Korea:

1. Imports of coal, iron and iron ores from the DPRK are forbidden with the following two exceptions:

(1) Trading that is determined to be conducted to generate profits solely for the people’s livelihood, and that does not involve the nuclear program or the ballistic missile program of the DPRK or any other profit generating activities prohibited in the Resolutions No. 1718(2006), No. 1874(2009), No. 2087(2013), No. 2094 (2013) or No. 2270 (2016) of the UN Security Council.

If the import falls into the range of the trade mentioned above, then during the import declaration, the enterprise shall submit to the customs authority a letter of commitment (See Annex 2) signed by its legal representative or principal and affixed with its official seal. If it is confirmed by solid information that the imports are not for the people’s livelihood, or are related to the nuclear program or the ballistic missile program of the DPRK, the customs authority will not clear such imports.

(2)Trading of coal that is confirmed not to be originated in the DPRK but is delivered and used to export from the Port of Rason through the DPRK, and such trade does not involve the nuclear program or the ballistic missile program of the DPRK or any other profit generating activities prohibited in the Resolutions No. 1718(2006), No. 1874(2009), No. 2087(2013), No. 2094 (2013) or No. 2270 (2016) of the UN Security Council.

If the import falls into the range of the trade mentioned above, the importing enterprise shall submit to the provincial competent commerce authority, where such enterprise is located, relevant information and application in advance, which shall then be submitted to the Ministry of Foreign Affairs via the Ministry of Commerce, and then notified to the Sanctions Committee of the UN Security Council for record-filing before the enterprise can begin to import. During the import declaration, the enterprise shall submit to the customs authority a letter of commitment (see Annex 3) signed by its legal representative or principal of the enterprise and affixed with its official seal and the certificate of original. If it is confirmed by solid information that the trade does not fall into the exception, then the customs authority will not clear the imports.

2. Imports of gold ores, titanium ores, vanadium ore, and rare earth minerals from the DPRK are forbidden.

3. Exports of aircraft fuel including aviation gasoline, naphtha aircraft fuel, kerosene aircraft fuel and kerosene rocket fuel are forbidden with the following two exceptions:

(1) The aircraft fuel that has been specially approved by the Sanctions Committee of the UN Security Council case by case to be transferred to the DPRK and verified to be used to satisfy basic human needs; however, special arrangements must be made to effectively monitor the delivery and use of such fuel.

(2) The aircraft fuel that is sold to civil airplanes outside the territory of the DPRK or is supplied solely for use in trips from and to the DPRK.
4. For details of the product embargo, please see Annex 1.

This Announcement shall be implemented as of the date of announcement.

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North Korea summer 2016 food shortage reports

June 19th, 2016

By Benjamin Katzeff Silberstein

‘Tis the season of news reports of food shortages in North Korea. Late spring and summer is the “lean season” for food in the country, when shortages tend to become more dire as the main harvest season approaches. In an interview with Radio Free Asia, the FAO-official Christina Coslet repeated the organization’s prediction of the harvest this year being the smallest since 2011. Moreover, PDS-distribution is reportedly down to 360 grams, the lowest since 2010 (click here for a recap in English by Korea Times):

기자) 코슬렛 담당관님, 우선 북한 식량 사정에 대해 살펴보죠. 요즘 북한의 식량 사정 어떻게 평가하고 있습니까?

코슬렛 담당관) “ The food security situation due to the decreased production is expected to worsen compared to the previous years….”

지난 몇 년 간 보다 훨씬 안 좋을 것으로 보고 있습니다. 아시다시피 지난해 가을 추수한 주요 곡물의 수확량이 크게 감소했습니다. 쌀의 경우 전년도에 비해 26% 감소했고, 옥수수도 3%가량 감소했죠. 북한이 올해 외부 지원이나 수입으로 충당해야 할 식량 부족량이 69만4천t에 이르는데요, 이 같은 식량 부족분 규모는 2011년 이래 최대 규모입니다. 하지만 현재 확보한 식량은 부족 분의 3% 가량인 2만3천t에 그치고 있습니다. [Summary: rice harvests are down by 26%, corn by 3%, the import need is the greatest since 2011 /BKS.]

[…]

기자) 북한 당국의 식량 배급량을 통해서도 북한의 식량 사정을 가늠할 수 있지 않나요?

코슬렛 담당관) “Yes, it is also another way to see the food shortage situation in the country…”

그렇습니다. 식량이 적게 배분됐다는 것은 그만큼 식량 사정이 좋지 않다는 걸 의미하죠. 올해 1월부터 3월까지 북한 당국이 주민 한 명 당 하루 배급한 양은 370g입니다. 하지만 4월부터 6월 배급량은 360g으로 줄었는데요 이는 지난 2010년 이래 가장 적은 양입니다. 그만큼 식량 사정이 좋지 않다고 볼 수 있죠. [Summary: PDS distribution was 370 grams per day between January and March this year, but went down to 360 grams between April and June /BKS.]

Full article:
FAO: Food shortages in North Korea largest in four years
Kim Hyun-jin
Radio Free Asia
2016-06-19

Of course, given the way that the North Korean economy functions today, one might question how much PDS-distributions really matter. There is quite a bit of regional variation in dependency on the PDS, and whatever the actual state of food supply, different localities will be hit differently whenever food supply is lacking.

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North Korea’s trade volume down 18 percent in 2015

June 14th, 2016

By Benjamin Katzeff Silberstein

According to KOTRA (reported by Yonhap):

North Korea’s trade volume sank 18 percent last year from a year earlier, ending five years of straight growth, due largely to a drop in the prices of its key trading items such as coal and overall shipments, a South Korean trade agency said Wednesday.

The North’s overall trade volume came to US$6.25 billion in 2015, compared with $7.61 billion the previous year, according to the state-run Korea Trade-Investment Promotion Agency (KOTRA).

The reclusive country’s outbound shipments fell 15 percent on-year to reach $2.7 billion, while imports also dropped 30 percent to $3.55 billion over the cited period, the data compiled by the agency showed.

Consequently, the communist state’s trade deficit reached $850 million last year, narrowing 33 percent from the previous year.

The North’s trade volume has been on a rising path since 2009 reaching an all-time high of $7.61 billion in 2014.

But a drop in prices of key trade items such as coal, coupled with a slowdown in China — its strongest ally — led to a decline in overall trade volume, KOTRA said.

Bilateral trade volume between North Korea and China came to $5.71 billion last year, down 16.8 percent from a year earlier,

The figure accounted for 91.3 percent of the North’s overall trade in 2015, slightly higher than the previous year’s 90.1 percent.

Two things are worth noting: first, it’s about trade volumes in dollar terms, not the amount of goods per se. Second, this would seem to add to what I’ve pointed out earlier on this blog – decreases in trade with China following the sanctions may simply be part of a pattern that began earlier, before the sanctions were put in place. In 2015, trade with China accounted for 90.1 percent of North Korea’s total trade.

Full article by Yonhap here:
N.Korea’s trade volume drops 18 pct in 2015
Yonhap News
2016-06-15

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China claims to ban more dual-use products from DPRK

June 14th, 2016

According to Reuters:

China’s Ministry of Commerce released a list of goods banned for export to North Korea on Tuesday, saying the items could be used to build weapons of mass destruction.

The list of dual-use goods, or products that have both civilian and military use, comes after the United Nations nuclear watchdog said North Korea appeared to have reopened a plant to produce plutonium from spent fuel of a reactor central to its banned atomic weapons drive.

The ministry said in a statement on its website that the list was meant to comply with the requirements of a round of U.N. sanctions imposed in March in response to a North Korean nuclear test in January.

The new list adds to a much longer Chinese list of banned goods released in 2013 after the North carried out its third nuclear test that year.

Analysts said at the time the 2013 list was a positive sign that China was working to implement U.N. sanctions targeting the North’s nuclear and ballistic missile programmes.

The new list names dozens of banned items including magnetic materials, high-strength metals, chemical fibres, and laser-welding equipment. It also lists about a dozen chemicals that could be used in producing “chemical warfare agents”.

The banned goods could be used in nuclear, biological or chemical weapons development, the ministry said.

But China has declined in the past to give a full list of items banned for export to North Korea, which U.N. monitors have said makes it difficult to assess how strictly China is implementing sanctions.

China remains North Korea’s largest trading partner and sole major ally. Chinese analysts have regularly expressed concern that North Korea could collapse in chaos if Beijing’s policies become too harsh.

Reclusive North Korea rattled nerves this year by carrying out a fourth nuclear test in January and a satellite launch in February.

Thanks to Werner (a reader), here is the list of newly prohibited items (in Chinese).

I am keeping up with China – DPRK trade in 2016 here.

Read the full story here:
China says to ban export of more dual-use goods to North Korea
Reuters
2016-6-14

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Kim visits National Defense University

June 12th, 2016

 

2016-6-13-1-01 2016-6-13-1-02

National Defense-uni-2016

Rodong Sinmun and KCNA report that Kim visited National Defense University. The story is not in English on their web sites yet, but the university is in Ryonsong District in Northern Pyongyang (39.169469°, 125.777240°). The Google Earth imagery of it is a little dated, but you can see where those two statues are going to be erected.

NDU-statue-site

Here is the story in Rodong Sinmun:

Kim Jong Un Visits National Defence University

Kim Jong Un, chairman of the Workers’ Party of Korea, first chairman of the National Defence Commission of the DPRK and supreme commander of the Korean People’s Army, provided field guidance to the National Defence University.

He paid tribute to the statues of President Kim Il Sung and leader Kim Jong Il at the university.

Watching the statues of smiling Kim Il Sung and Kim Jong Il, he said with deep emotion that the university is associated with the exploits they performed by tirelessly working heart and soul for developing the Juche-oriented national defence industry in the whole period of their revolutionary careers.

He said that the statues of the great leaders were erected at the university on the occasion of the 49th anniversary of Kim Il Sung’s visit to it, adding that this was a great event of weighty significance in adding eternal shine to the immortal revolutionary exploits of the great leaders recorded in the history of education in the Juche-oriented national defence science and constituted an immense pride and happiness of all teaching staff and students of the university and personnel in the field of the national defence industry.

He went round the room for the education in the revolutionary history and room dedicated to the history of the university.

Kim Il Sung proclaimed the founding of the National Defence College, the predecessor of the National Defence University, in October, 1964 and visited it several times and took meticulous care of it including the establishment of departments, students’ uniform, cap-badge and collar badge and clearly indicated the road to be followed by it.

Kim Jong Il took a measure to newly build the university in an excellent place and led it with loving care so that it could fulfill its mission and duty as a center for training national defence scientific and technical personnel.

Watching historic data, Kim Jong Un said that the university has developed into the highest seat of training Juche-oriented national defence scientific and technical personnel having hundreds of persons with academic degrees and titles, several colleges, faculties, a doctorial institute, etc.

Looking at photos on the board introducing heroes one by one, he said that there are many acquaintances at the university, a clear proof that it has covered a proud path following the party. The university has produced a lot of personnel who have protected our party, he added.

He went round various places of the university including an exhibition hall of education science, e-library, weaponry hall, etc. to learn in detail about the teaching and education and scientific research.

He set forth the tasks to be fulfilled by the university.

Noting that the National Defence University is one of the universities for which he has the deepest affection and to which he attaches importance, he said he would frequently receive reports on the problems arising in the teaching and education at the university and personally settle them. He promised to turn the university into the most prestigious one in the country, an iconic university training hardcore personnel and talents who would shoulder upon themselves the national defence science and the world first class one.

He had a photo session with the officials and teachers of the university.

He was accompanied by Ri Man Gon, vice-chairman of the C.C., the WPK, Yu Jin and Jo Yong Won, vice department directors of the C.C., the WPK.

Here is coverage of the story in Yonhap:

North Korea’s leader Kim Jong-un has reaffirmed his intent to stick to nuclear weapons when making his first military-related public activity since the party congress in May, the North’s state media showed Monday.

Kim conducted the so-called field guidance at National Defense University, which the communist country says contributes to its defense industry, according to the North’s official Korean Central News Agency (KCNA). It did not specify the date of his visit.

Kim was quoted as saying by the KCNA that the mission of the university is to nurture talented people in a bid to further consolidate the country’s status as a nuclear power state in the East.

It marked the first inspection into the defense sector since the country concluded the congress by the Workers’ Party of Korea (WPK) on May 9.

Since the party event, the North’s young leader has focused on economy-related public activities including visits to a tree nursery and saltern, as he has stressed the need to boost its fragile economy on the principle of self-reliance.

At the party congress, Kim called his country a “responsible” nuclear state, saying that he will “permanently” defend the pursuit of his signature policy of developing nuclear weapons and boosting the country’s moribund economy.

The KCNA said that the National Defense College, the predecessor of the university, was set up in October 1964 during the regime of the country’s founder Kim Il-sung.

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Domestic food price dip in North Korea

June 12th, 2016

By Benjamin Katzeff Silberstein

North Korea’s domestic market prices have been behaving somewhat counterintuitively as of late. Harvest declined last year (or at least so the FAO claimed), and given the latest round of sanctions, it wouldn’t have been unreasonable to expect some hoarding and anxiety on the markets, out of anticipation that China may come to control cross-border trade and smuggling more tightly.

Not so, Daily NK reports:

Despite the lean season, referred to domestically as the “barley hump,” during which grains typically get pricier in North Korea, prices are instead on a downward trend, Daily NK has learned.

Daily NK’s sources within the country believe relaxed restrictions on marketplace activity under the Kim Jong Un regime has helped create a balance in the supply and demand of food by way of imports, narrowing the range of price swings even when the local supply dips during the “barley hump.”

“People were quite worried about the economic sanctions from China but are now relieved to see that rice prices have not changed much,” a source in Ryanggang Province told Daily NK, She reported that in her region, rice, which had been selling at 5,000 KPW (a kilogram) until just a few days ago, had dropped to 4,500 KPW; corn, which fetched 1,200 KPW, slid to 1,000 KPW; and pork prices fell about 1,000 KPW to 11,100 KPW.

“More vendors now import rice, corn, etc. from China, so there’s more than enough to go around even after making up for the shortfall in local supply during the barely hump,” she added, explaining that the dip in rice prices is in large part due to the upcoming harvest of early potatoes and barley, as vendors look to offload their supplies.

Overall, it appears, judging from the stability of market prices, that both formal and informal market mechanisms in North Korea function well enough to make up for shortfalls in production.

Full article:
Dip in prices help residents surmount ‘barley hump’ 
Kang Mi Jin
Daily NK
2016-06-12

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