How should we understand North Korean market crackdowns?

November 8th, 2018

By Benjamin Katzeff Silberstein

Daily NK reports (in Korean) that a “inspection unit against anti-socialist activities”, is active on Hyesan markets, inspecting goods and confiscating ones deemed either illegally smuggled in from China, or harmful for people’s health, such as narcotics. Such “units” (“그루빠”) are fairly common in North Korea, and typically consist of officials from various public security agencies cooperating to get at a specific, problematic tendency in certain areas or spheres of society.

We’ve seen quite a lot of news over the past few months, and even years, of market crackdowns under Kim Jong-un. On the one hand, this is simply the North Korean state apparatus being itself, and cracking down on “deviant” behavior such as smuggling, and trading of a range of, likely often arbitrarily, forbidden goods, and not least foreign media and information. Unsurprisingly, the agents conducting these searches tend to often quietly disappear if given the right amount of cash or cigarettes:

소식통은 “이 단속 그루빠는 장사꾼들에게 여러 트집을 잡지만 결국 돈이나 담배를 받으면 몇 마디하고 슬그머니 물러난다”면서 “갑자기 그루빠들이 열을 올려서 주민들은 ‘무슨 꿍꿍이가 있느냐, 돈벌이를 하려는 것이냐’며 불평을 한다”고 전했다.

On the other hand, however, one could see this as a process of the state making the market more regularized and based on rules. Kim Jong-un seems to appreciate the stability and wealth brought by the markets, and has worked to integrate them further into the regular economic system. Clamping down on smuggling and trade deemed unsuitable from the state’s perspective, in a way, is part of this process. Clampdowns like this, in a way, seem to go in parallel with increasing regularization of market trade, through the permit regime, designated market buildings, and the like. The North Korean government’s acceptance and institutionalization of the markets has never been driven by an ideological commitment to free-market liberalism, but rather, by the opposite: aspirations for stability, and greater economic control.

Share

What real estate investments in Pyongyang tells us about the North Korean economy

October 30th, 2018

By Benjamin Katzeff Silberstein

A few days ago, Daily NK reported that apartment prices in Pyongyang have fallen by significant proportions over the last few months. They first wrote about it in Korean last week:

평양 소식통은 26일 데일리NK와의 통화에서 “평양에서 아파트 가격이 많이 눅어(떨어)졌는데, 이상하게도 아파트 건설은 줄어들지 않고 오히려 늘고 있다”면서 “중심 구역뿐만이 아니라 낙랑구역이나 서성구역 등 외곽 지역에서도 많이 올라가고 있는데, 내가 본 것만 7개다”고 말했다.

소식통은 이어 “돈주(신흥부유층)가 돈 내고 건설해서 팔아먹는데 창전거리나 려명거리에 있는 아파트처럼 멋지게 올라가고 있다”면서 “아파트 건설은 보통 20~30명의 군인이 동원돼 건설 중이며 30층짜리 아파트도 있고 종류가 다양하다”고 덧붙였다.

이달 초 본지는 올해 6월까지 20∼30만 달러(이하 면적 230㎡)를 유지해왔던 평양의 중심지역인 중구역 및 대동강 주변 아파트 가격이 8월에 5만 달러 이상 하락한 것으로 파악됐다고 보도한 바 있다.

이처럼 아파트 가격의 폭락에도 불구하고 아파트를 건설하는 데는 신규 아파트의 경우 고가로 거래되기 때문에 투자가치가 있다고 판단하는 것으로 분석된다.

본지가 지난 4월 입수한 탑식 아파트 경제 타산서(북한식 공사 손익계산서)를 조사한 결과 40세대가 사용할 수 있는 아파트(한국의 빌라, 총 12층 기준)를 건설할 때 약 23만 달러(약 2억 4000만 원)의 수익을 내는 것으로 나타났다. (▶관련 기사 바로 가기 : 경제타산서 입수…”40세대 아파트 건설·분양시 23만달러 수익”)

또한 지난 10년간 아파트 가격이 지속 상승, 돈주들에게 많은 부를 안겨준 점도 한몫 하는 것으로 보인다. 아울러 한반도 평화 분위기 속에 향후 대북제재가 해제되면 다시 아파트 가격이 상승할 것이라는 기대 심리도 작용한 것으로 관측된다.

And in English here, yesterday:

Despite the fall in North Korean real estate prices, apartment construction has not slowed down, report sources in the country.

“The prices of apartments in Pyongyang have fallen a lot, but strangely the construction of apartments has continued and even increased,” said a Pyongyang-based source on October 26. “There’s apartment construction going on in central Pyongyang and in the city’s suburbs, like the Rakrang and Sosong districts. I’ve seen seven apartment construction sites myself.”

A separate source in Pyongyang added, “The donju (nouveau riche) are financially supporting these apartment construction projects and then selling the apartments to buyers. There are really nice ones being constructed, similar to those in Changchon Street and Ryomyong Street. Twenty to thirty soldiers are usually mobilized to build them. There are 30-story apartments and others of varying heights.”

Daily NK reported earlier this month that the price of apartments in central Pyongyang, including in Jung district and those near the Taedong River, had fallen from a high of 200-300,000 dollars in June this year to around 50,000 dollars in August.

However, local investors still appear keen to build the apartments because they can be sold for significant profits.

According to an analysis of a North Korean construction profit-and-loss statement Daily NK obtained in April, apartments that can house 40 families (around 12-stories tall; similar to South Korean “villas”) can make a profit of around US $230,000 US dollars (around 240 million South Korean won) [from rent].

The continued rise in apartment prices over the past 10 years has helped the donju accumulate a lot of wealth, which appears to be one factor in the continued construction of apartments. And as tensions on the Korean Peninsula have dissipated, there may also be the expectation among investors in the country that international sanctions will be lifted, which would again lead to a rise in apartment prices.

Full article/source:
Apartment construction remains steady despite fall in real estate prices
Moon Dong Hui
Daily NK
2018-10-30

The dynamics at play here tells us something very interesting and important about the current state of North Korea’s economic system. For all the developments and changes over the past couple of decades, and particularly under Kim Jong-un, basic functions of a regular market economy, such as formal channels for investments, through which people can see their savings grow in value (or shrink, in bad times). In North Korea, however, private investments technically remain illegal. Housing is one area where they’ve become standard practice and more or less regularized, despite the judicial murkiness of it all.

So when housing prices decline, what are people going to do, if they don’t want to keep their money laying around passively? Keep putting them into housing. After all, a lower profit is better than no profit. This dynamic can’t last forever, but as of now, the fact that investment opportunities are still relatively few may be keeping a bubble alive that already burst.

Share

Humanitarian aid, luxury goods and aid diversion in North Korea

October 29th, 2018

By Benjamin Katzeff Silberstein 

North Korea imported luxury goods from China for at least $640 million, says one South Korean lawmaker. Reuters:

“Kim has bought lavish items from China and other places like a seaplane for not only his own family, and also expensive musical instruments, high-quality TVs, sedans, liquor, watches and fur as gifts for the elites who prop up his regime,” opposition lawmaker Yoon Sang-hyun said in a statement.

“With the growing loophole, Kim would be able to near his goal of neutralizing sanctions soon without giving up the nuclear weapons.”

Last year, North Korea spent at least $640 million on luxury goods from China, according to Yoon.

China does not provide breakdowns of its customs figures. Yoon compiled data based on a list of banned items crafted by Seoul in line with a 2009 U.N. resolution.

Beijing’s customs agency did not immediately respond to a request for comment. Beijing has said it strictly abides by international sanctions against North Korea.

The 2017 luxury trade volume was down from the 2014 peak of $800 million, but was only a 3.8 percent drop from $666.4 million in 2016, according to Yoon.

The luxury items accounted for 17.8 percent of North Korea’s entire imports from China last year which totaled $3.7 billion, Yoon said.

Purchases of electronic products such as high-end TVs made up for more than half of the total transactions, worth $340 million, followed by cars with $204 million and liquors with $35 million.

China’s trade with North Korea from January to August this year tumbled 57.8 percent from the year-earlier figure to $1.51 billion, China’s customs agency said last month.

But Yoon’s analysis also shows North Korea funneled more than $4 billion into luxury shopping in China since Kim took power at the end of 2011.

Yoon accused China of loosening enforcement of sanctions, and criticized South Korea’s recent request for U.N. and U.S. exemptions to restart inter-Korean economic cooperation.

Full article:
North Korea bought at least $640 million in luxury goods from China in 2017, South Korea lawmaker says
Hyonhee Shin
Reuters
2018-10-22

Now, none of this means that Kim Jong-un is personally swimming in a sea of handbags and TV-sets in Pyongyang. Rather, it means that North Korea – whether semi-private companies or state entities – has imported a fair amount of so-called luxury goods, despite sanctions that should prevent such imports. The term “luxury goods”, moreover, is too broad in this case and encompasses several items that wouldn’t necessarily be classified as “luxurious” by most.

At the same time, UN institutions estimate that 1/4 of children in rural North Korea are underweight. As Chosun Ilbo reports:

The wealth gap between country and city is widening. One in every four rural children is undernourished and underweight and the North has the most serious poverty issue in East Asia, the FAO said.

The wealth gap between country and city is widening. One in every four rural children is undernourished and underweight and the North has the most serious poverty issue in East Asia, the FAO said.

The proportion of underweight children in rural areas is 27 percent but only 13 percent in the cities.

Full article:
1/4 of Rural Kids in N.Korea Underweight
Kim Myong-song
Chosun Ilbo
2018-10-18

The World Food Program (WFP), meanwhile, has only received 27 percent of their funding appeal for 2018:

According to Herve Verhoosel, a spokesperson for the World Food Programme (WFP), the UN agency is staring at a massive 73 per cent shortfall in funding for 2018, hurting critical programmes such as nutritional support for children.

“We must not wait for diplomatic progress to alleviate the suffering of millions of people – funds are urgently needed now,” said Mr. Verhoosel.

“Any donation we receive today will take at least six months to reach the people who need it, due to the time it takes to purchase and transport food.”

A lack of funding risks reversing small gains in nutrition for mothers and children, made over the past four years, on the back of concerted efforts by humanitarians. Limited funding has also resulted in the suspension of operations to build resilience among disaster-hit and vulnerable communities.

WFP needs $15.2 million over the next five months to avoid further cuts to programmes which help feed around 650,000 women and children each month.

Across the country, which is officially known as the Democratic People’s Republic of Korea (DPRK), more than 10 million people – almost 40 per cent of the population – are undernourished and in need of support, with one in five children stunted due to chronic malnutrition.

The country is also vulnerable to natural disasters, such as drought and flooding, which affect agricultural production and livelihoods.

Article source:
Critical food programmes in North Korea can’t wait for ‘diplomatic progress’, UN food agency warns
UN News
2018-10-09

So, what is really going on here? Is it accurate to say, like the headlines imply, that North Korea’s leadership is simply buying a bunch of luxury items for millions of dollars and letting children starve in the countryside? Is there a real risk that humanitarian aid can be diverted to the army, and what does this really mean? These are separate questions, but they are interrelated in the sense that they all touch upon Pyongyang’s incentives and policy choices when it comes to its humanitarian situation.

On 38 North, the host website of this blog, Kee Park and Eliana Kim show convincingly that the fear of diversion of aid to the military is exaggerated and unfounded:

International donors and organizations have become increasingly reluctant to provide funds to North Korea. Although five countries—Switzerland, Sweden, Canada, France and Russia—have responded to the UN’s request this year, there is still a funding gap of $88.1 million. Previous donors such as United Kingdom, Australia, Japan, Ireland, South Korea and others remain uncommitted. One concern frequently cited for this reluctance is that foreign aid, including critical humanitarian aid, will either be diverted to the military or fund the nuclear weapons and missile programs or take pressure off of the regime to provide for its people.

However, these concerns are based on basic misunderstandings of how and why humanitarian assistance is provided to North Korea. Facts on the ground show that the potential for diversion is minimal and the main benefactors are generally not government or military institutions. Given the mission of UN humanitarian assistance, denying the DPRK this assistance for political purposes is both unethical and inhumane.

Full article:
The Case for Funding the UN’s Request for Humanitarian Assistance to the DPRK
Kee B. Park and Eliana E. Kim
38 North
2018-10-23

One of their most central arguments is that opportunities for diversion are too small to be meaningful. Overhead costs only make up a small percentage of total costs, and little of it could even hypothetically be diverted given that it’s all needed to run UN operations in the country. When it comes to diversion of actual food aid, the authors argue that most diversion that may occur is done towards the markets – that is, the state doesn’t actually take foodstuffs for its own use, and resources that are used elsewhere do not necessarily benefit the North Korean government.

It also seems like diversion was much more of a real concern in the 1990s and early 2000s. The worry was primarily about diversion of food aid to the military and away from society’s most needy, and it wasn’t unfounded at all.  But we have to assume that there’s been a great deal of learning done by NGOs and international institutions present on the ground. They know what they’re doing.

Today,  food aid volumes aren’t large enough to be meaningful for the army to try to divert, it seems, even if they would want to. Much of the aid, moreover, consists not of rice and other goods consumed by the general public, but likely of nutritional assistance designed to maximize the caloric intake of vulnerable groups such as children and breastfeeding mothers. We also have to remember that the chain of aid distribution and reception is long and diverse. Park and Kim argue that Pyongyang has invested much more in recent years to meet humanitarian needs. I would add that people who have worked with humanitarian aid delivery on the ground have often commented on how local officials and staff members, regardless of what one might think of Pyongyang’s intentions, are often passionate and genuine in their will and hard work to ensure that food aid reaches their local constituents and intended recipients.

However, this angle misses an important point. Diversion isn’t just about the army grabbing bags of rice intended for malnourished children, it’s also, arguably, about resources in the bigger picture. At the end of the day,  for the North Korean regime, feeding the most vulnerable is a matter of priority. We know it could, should it choose to do so. Even in years when North Korean harvests have likely been lower than this year (which we don’t yet have figures for) given the upward  trend in harvests over the past few years, the deficit left between domestic production and projected need wouldn’t have been that expensive to make up for.

Enter the luxury goods. We don’t know what proportion of the $640 million represent purchases strictly made by the state, and not by individual North Koreans or private enterprises. (The lines in this realm are rarely clear-cut.) But even low-balling it and assuming that only 1/6 is bought by the government to supply Kim Jong-un’s court and patronage networks, that’s still more than what would have been required in food imports to meet the estimated needs of the population in 2012, when, again, production was probably even lower than it is today. The UN appeal of $111 million of this year is also roughly equivalent to 1/6 of North Korea’s estimated “luxury” goods import of the past year.

And that’s just using luxury goods as an illustrative example. We could also look at any one of the massive infrastructure investments by Kim Jong-un and the renovations and new constructions of entire city blocks and streets in Pyongyang, or loft projects such as the Masikryong Ski Resort. The point is that North Korea surely has the funds to cover the humanitarian needs of the most vulnerable among its population, but chooses not to and instead counts on the UN to foot the bill for doing so. A form of “diversion”, if you will.

This is not to argue either for or against giving humanitarian aid. That the regime makes certain policy choices seems a morally problematic argument for not funding humanitarian needs. But in the long run, especially as North Korea’s economic health improves, one has to wonder whether it’s sensible for the international community to keep paying for humanitarian needs in a country whose regime could afford to do so, but makes a different policy choice, year after year.

Share

Two Koreas start railway inspections

October 21st, 2018

Benjamin Katzeff Silberstein

South and North Korea are likely to start their joint on-site inspection as early as this week for a project to modernize and re-link railways across their border, government officials said Sunday.

At high-level talks last week, the two Koreas agreed to begin field surveys of the western Gyeongui railway in late October and the Donghae railway along their east coast in November.

“The Koreas are known to be discussing ways to conduct the inspection (on the North section) of the Gyeongui line starting late this week,” a government official said.

“The schedule is flexible, depending on consultations between the government and the United Nations Command (UNC) over the passage of the Military Demarcation Line,” he added.

In August, the Koreas failed to carry out a joint railway field survey as the U.S.-led UNC did not approve the plan, citing “procedural” problems, a move widely seen as U.S. objection to the inter-Korean railway project on the basis that it might hamper sanctions.

“As far as I’m concerned, Seoul’s consultations with Pyongyang as well as the UNC are smoothly under way,” the official said.

If launched, the joint inspection will involve the test operation of a train on the railway linking Seoul to the North’s northwestern city of Sinuiju.

After that, the Koreas will check the eastern railway on the North’s side that connects Mout Kumgang to its northeastern North Hamgyong province.

South and North Korea are looking to hold a ground-breaking ceremony for work on the rail and road systems along the eastern and western regions either in late November or early December.

Meanwhile, the two Koreas plan to hold working-level talks starting this week to implement agreements of the inter-Korean summit held in Pyongyang last month.

Full article/source:
Koreas to start joint inspection of western railway as early as this week
Yonhap News
2018-10-21

Share

Moon’s Europe trip

October 16th, 2018

Benjamin Katzeff Silberstein

President Moon went to Europe. In France, he argued that sanctions against North Korea should be eased. Yonhap:

Moon agreed with the need to maintain pressure on the North until it denuclearizes, but said such pressure could be or should be eased to encourage the impoverished North.

“I believe the international community needs to provide assurances that North Korea has made the right choice to denuclearize and encourage North Korea to speed up the process,” the South Korean president told the joint press conference.

Moon’s remarks come amid an apparent tug of war between the United States and North Korea over when the North should be entitled to rewards for giving up its nuclear ambition.

Pyongyang is said to be demanding timely rewards for what it claims to be irreversible denuclearization steps it has already taken while Washington is insisting on maximum sanctions and pressure until the impoverished nation fully denuclearizes.

In his third bilateral summit with Moon, held in Pyongyang last month, North Korean leader Kim Jong-un offered to take additional denuclearization steps, including the dismantlement of the country’s only nuclear test site, in presence of international experts for verification.

“Chairman Kim Jong-un has said he is willing to not only halt the country’s nuclear and missile tests and also dismantle its production facilities, but also dismantle all nuclear weapons and nuclear materials it currently possesses if the United States takes corresponding measures,” the South Korean president told Macron in their meeting, according to Moon’s chief press secretary Yoon Young-chan.

Full article/source:
Moon says France, U.N. can speed up N. Korea’s denuclearization by easing sanctions
Yonhap News
2018-10-16

Share

N Korea condemns international sanctions, again

October 16th, 2018

Benjamin Katzeff Silberstein

Yonhap summarizes KCNA:

In a commentary by an individual writer, the Korean Central News Agency said that the U.S. should take corresponding steps in response to Pyongyang’s major conciliatory action in the past few months.

“If the U.S. intends to be stubborn in its sanctions, which means to continue to pursue hostile policy, is the Singapore Joint Statement which promised to end the extreme hostile relations between the DPRK and the U.S. and to open up new future of any worth and what did the U.S. president mean by ‘big progress’ which he bragged,” the commentary said in English.

“Quite long period has passed since the DPRK stopped nuclear tests and inter-continental ballistic rocket launches and it is, therefore, natural for sanctions measures taken on that pretexts to disappear accordingly,” it added.

DPRK stands for the North’s official name, the Democratic People’s Republic of Korea.

The commentary emphasized that China and Russia have also called for denuclearization and the establishment of peace on the Korean Peninsula in a “phased” and “simultaneous” way, meaning each country involved should take corresponding measures every step of the way.

It even called into question the real intention behind Washington’s firm stance on sanctions.

“It is an undeniable reality that denuclearization and sanctions are misused as tools for meeting party interests and strategies of the political forces within the U.S., not to solve bottleneck problems between the DPRK and the U.S. to even a certain extent,” it said.

Its accusatory tone comes as the leaders of the U.S. and North Korea are pushing to hold their second summit meeting “at the earliest possible date,” resuming diplomacy after months of stalemate since their first-ever meeting in Singapore in June.

During the June summit, North Korean leader Kim Jong-un promised to work toward the “complete” denuclearization of the Korean Peninsula in return for “new” relations with the U.S.

The North has demanded the U.S. take “corresponding” measures for what it claims to be substantive and practical denuclearization steps, including a moratorium on missile and nuclear tests and dismantling of a major nuclear test site. Easing sanctions and declaring an end to Korean War have been cited as possible concessions.

Full article/source:
N. Korea demands lifting of sanctions, calls them hostile policy against Pyongyang
Yonhap News
2018-10-16

Share

North Korea’s economic growth – from Pyongyang’s perspective

October 15th, 2018

By Benjamin Katzeff Silberstein

Has North Korea’s economy been growing under sanctions? That’s what an economist in Pyongyang claims. In a recent interview with Kyodo (published here by Japan Times), Ri Gi Song at Pyongyang’s Institute of Economics at the Academy of Social Sciences, claimed that North Korea’s GDP per capita grew by 3.7 percent in 2017, a year during which the country was virtually banned from selling its most crucial export goods, and faced very harsh conditions for importing crucial resources such as oil and fuel. When factoring in population growth, the GDP-growth-figure diminishes somewhat to 3.2% (see below), but it’s still firmly in the same range.

Strange as it may sound, it is possible to imagine that North Korea’s economy wouldn’t contract severely during a year of sanctions. GDP growth alone is a poor way of measuring long-run, sustained economic growth and progress. While it may sound counter-intuitive, the sanctions, while depressing the economy in certain ways, may have boosted it through other mechanisms. The ban on coal imports from North Korea, for example, may well have boosted certain industries, as this blog has covered in the past. Because exports have dwindled drastically, the price at which North Korean coal can sell – domestically as well as internationally – gets much, much lower than when it could be sold in greater quantities on a somewhat competitive market. So with lower prices for factors of production, industry could certainly experience growth in the short-run. But this would only be a temporary and meaningless boost, since the losses from unsold goods abroad would be much greater.

In other words, Ri may be partially right, but numbers are also likely inflated for political reasons. Here’s an excerpt from the interview, annotated with comments:

North Korea’s economy grew 3.7 percent in 2017, a professor of a think tank in Pyongyang said in brushing aside the view that the country has faced an economic contraction against a backdrop of international sanctions.

Even though North Korean economic data has become somewhat more public and plentiful in the past few years, there are still undeniable political imperatives in publishing data that makes the country appear resilient in the face of sanctions. After all, if sanctions aren’t “working” (whatever that may mean), what’s the point in keeping them? That, of course, doesn’t mean that such figures are accurate, wholly or partially.

Ri Gi Song, a professor of the Institute of Economics at the Academy of Social Sciences, said in a recent interview with Kyodo News that North Korea has achieved economic expansion without depending on other nations.

Well, he would say that, since that is how Juche is spoken. That doesn’t mean it comes from a place of literal belief; it’s simply what you say if you’re a North Korean economist speaking from your official position, and shouldn’t be read as an expression of delusion or the like.

Ri said gross domestic product totaled $30.70 billion in 2017, up from $29.60 billion in 2016. It is very rare for North Korea to disclose its GDP and also the first time that the country’s GDP data in the past two years have been unveiled.

But it is impossible to verify the accuracy of the figures, as the professor did not make public other economic indicators such as consumer spending, investment and inflation rate.

Although a report released by South Korea’s central bank showed in July that the North’s economy shrank 3.5 percent in 2017 from the previous year, Ri shrugged it off, saying Seoul’s calculation is “only an estimation.”

Ri is right that South Korea’s figures are only estimates, albeit careful ones based on models developed and refined (presumably) through years of experience. But the thing is, Ri’s official North Korean figures, too, are only an estimate. Even in the best of situations, no GDP-figure is exactly certain and precise. To calculate as vast of an “object” as a country’s economy, some assumptions inevitably have to be made. One of them is that various forms of reporting is generally accurate.

In the case of North Korea, however, this problem is incomparably worse than in open, democratic free market-economies. Let’s assume for a moment that the North Korean government genuinely is eager and willing to generate real, trustworthy and truthful economic statistics, which in many ways does seem to be the case. Even so, how do you generate accurate accounts reporting in an environment when the going principle for a long time has been that planning targets must be met regardless of actual conditions? And with so many different forms and models of enterprise in action throughout the country, seemingly with little but perhaps improving consistency across the board, how would it be reasonable to expect the North Korean government to be able to calculate a reasonable GDP-figure? That’s not even getting started on the investments-portion, a crucial variable to determine growth. Private investments into partially private enterprises is still technically illegal in North Korea, but there are many signs to suggest that it’s taking place on an increasingly substantive scale.

So, even if the North Korean government’s statistical authorities have all the right intentions, I don’t envy their working conditions one bit.

He said North Korea’s population grew to 25,287,000 last year from 25,159,000 in 2016. Based on the figures, the country’s per capita GDP stood at $1,214 last year, equivalent to that of Myanmar.

This means that the actual growth rate claimed by Ri, factoring in population growth, is 3.2%. This, however, still isn’t the “real” growth rate. To get those numbers, we’d need to factor in inflation, and no reliable numbers are available to let us do that. But on the face of it, judging by the price trends for foreign currency and rice through 2016–2017, inflation wasn’t visibly large or out of the ordinary. Even so, we simply don’t know.

In an attempt to overcome the negative impact of international economic sanctions, North Korea has “developed various technologies” under the spirit of “self-reliance,” Ri said, adding the nation has implemented measures to save the utilization of crude oil, for example.

This is certainly true to an extent. Just look at the masses of North Koreans purchasing solar panels for electricity rather than relying on scantly available government supplies of power. And as mentioned above, there is some sense in this argument, if interpreted in a slightly broader manner, that North Korea’s economy may have experienced some gains in efficiency from sanctions, as people are forced to find new, creative ways to get around increasingly tricky conditions. And industry may have gotten a boost from lower energy prices, as may other consumption, since citizens can theoretically spend more on other items if energy prices fall.

Still, this boost would only be marginal, and temporary at best. It certainly wouldn’t create 3.2 percent growth rates, although it might have contributed.

[…]

Ri acknowledged that North Korea has suffered food shortages, but emphasized that the heavy and light industries as well as the chemical sector have been growing and electric power conditions have been improving.

Amid a thaw in inter-Korean relations, Ri expressed hope for economic cooperation with the South.

Full article:
North Korea’s economy grew 3.7% in 2017, Pyongyang professor estimates
Japan Times/Kyodo
2018-10-13

At the end of the day, as Andray Abrahamian points out, neither North nor South Korea publishes their methodology for calculating North Korea’s growth rates, so all we can do is speculate about the assumptions that go into the models.

Share

China-NK trade dropped by 59.2% January–September of 2018, says China

October 13th, 2018

Benjamin Katzeff Silberstein

Global Times reports Chinese customs figures:

China has consistently complied with UN’s resolutions on North Korea and bilateral trade tumbled 59.2 percent year-on-year from January to September, said an official with the General Administration of Customs (GAC) on Friday.

The value of China’s trade with North Korea was 11.11 billion yuan ($1.61 billion) in the first three quarters, according to data released by the GAC.

During the same period, China’s export volume to North Korea was 10.11 billion yuan, down 40.8 percent on a yearly basis and imports stood at 1 billion yuan, down 90.1 percent year-on-year, the GAC data showed.

The implementation of the Security Council’s decision is an obligation that all UN members should fulfill, said Li Kuiwen, an official with the GAC.

Li noted that “China’s customs has consistently carried out the relevant resolutions of the Security Council in a comprehensive, accurate, serious and strict manner.”

China’s trade volume with North Korea in the January-to-August period fell 57.8 percent from a year earlier to $1.51 billion, the GAC said on September 23.

Article source:
China-North Korea trade drops 59.2% in January-September period: customs
Global Times
2018-10-13

Share

Where do North Korea’s agricultural policy changes stand?

October 9th, 2018

By Benjamin Katzeff Silberstein

Over at NK News, Peter Ward recently published a highly interesting piece on Kim Jong-un’s official endorsement of agricultural policy changes. As Ward notes, one has to read beyond the carpet of propaganda-esque language to really see the subtle but significant changes in how official sources, at the highest level, talk about agricultural management:

Under the system that Kim Jong Un introduced in 2014, the sub-work team leader remains the line manager in charge of day-to-day operations. However, their team now usually consists of 15-20 people, though can sometimes be smaller where the land is better and farm more mechanized.

Kim emphasizes the sub-work team leader’s core role as a conduit for Party agricultural policy and the so-called “Juche Agricultural method.” The sub-work team leader must extol such methods and ensure that production tasks given to them by the party are carried out.

In Kim’s vision, the sub-work team leader is akin to an entrepreneur in charge of their staff: tasked with overcoming issues and implementing party directives in a creative and dynamic fashion in line with circumstances. The sub-work team manager is supposed to lead from the front – “up first in the morning and to bed latest at night.”

Much of this could arguably have been said about production leaders under old institutional arrangements in North Korea as well. Ward, however, points out a significant change:

One point that Kim makes that is revolutionary however, is that the state will take “a certain portion of grain [produced],” leaving “the rest to farmers whose distribution will be decided by the number of days they have worked – the amount they have earned.” This is the essence of the new system: farmers keep anything they harvest beyond their mandatory state quota (planning indicator), the state no longer just takes everything before providing a fixed ration.

Full article here:
Masters of the farm: North Korea’s new agricultural entrepreneurs
Peter Ward
NK News
2018-10-09

One crucial question that seems to remain, however, is around how the state sets its quotas. As Ward points out, farmers get to know ahead of time how much of their output they will get to keep, based on estimated harvests. In a recent dispatch, Daily NK said that no matter the actual production, the state takes its pre-set share in absolute terms even when actual production ends up being lower than anticipated. In other words, there’s still much room for predatory economic governance by the state, especially since the new system may still lack clear and transparent central guidelines by the state. In any case, the new system, judging by all available information, is a step towards greater efficiency.

Share

Grain yields appear to be down in North Korea this season

October 4th, 2018

Benjamin Katzeff Silberstein

At least judging from the trend at one farm:

September’s grain yield projection for the Ripsok Cooperative Farm in Mundok Country, South Pyongan Province, has been set at 60% of the estimate made earlier in the year.

North Korea habitually sets high grain production targets but in reality, the government actually expects to achieve 60%-70% of the projection. For example, last year the Ripsok Cooperative Farm set their grain production goal at 6000 tons, but achieved an actual yield of 3800 tons.

This year’s harvest is expected to reach only 3600 tons, representing an approximate 5% decline from last year.

Analysts have predicted a reduced grain harvest this year due to damage from the drought and typhoon that hit North Korea’s grain producing regions including South Pyongan and North and South Hwanghae provinces. However, this report marks the first internal acknowledgement of the country’s reduced grain yield.

“In the middle of September, cadres from the Rural Management Committee came out to check the crop yield and estimated that it will be less than last year’s,” a source in South Pyongan Province told Daily NK.

At the end of August and early September each year in South Pyongan Province, the Party’s district agriculture department cadres, collective farm advisers, and people’s committee agriculture managers tour the farms and determine expected grain yields. These estimates are conducted nationwide and the information is sent to the central government.

Ripsok Cooperative Farm is considered a highly productive farm with an annual planned grain production of 6000 tons, at a 7:3 ratio of rice to corn and other grains. Its continued operation involves approximately 5000 people, including farmers and household members.

However, when the Mundok County Party Committee members, Rural Management Committee and other cadres heard that the year’s harvest will be lower than last year’s, they were openly disappointed. Officials believe that natural disasters were a major cause, the source said.

Even if the production fails to reach its projected yield, the North Korean government buys back 30% of the grain based on its original planned output. Although the national price is 240 won per kilo, the market price is 5000 won per kilo, which means that the government basically buys the grain for free.

After the government buyback, seeds, grains and debts are repaid, and the remaining profit is distributed to the farmers.

“After considering the buyback from the government, as well as the storage of seeds and grain and debt repayment, the farmers who have worked so hard throughout the hot summer to prevent crop damage will receive a lot less than they did last year,” a separate source in South Pyongan Province reported.

This piece of information about how buyback figures are estimated is interesting. Though farming administration has become much more liberal (if you will), it doesn’t mean that the government has rolled back its heavy hand entirely in economic management. With reforms such as the household-responsibility system, the central basis for the government is increased efficiency, not necessary benevolence.

Full article:
Grain yield projection takes 5% hit at farm in South Pyongan Province
Jo Hyon
Daily NK
2018-10-05

Share