Archive for June, 2008

Daily NK reports rice prices falling

Monday, June 23rd, 2008

According to the Daily NK, the price of rice in North Korea is falling faster than the purchasing power of the Won.  My congratulations to the few individuals who no doubt figured out how to short North Korean rice (borrow it, sell it, then buy some more at the new lower price to pay back the loan). For the poor North Koreans who bought into the bubble at its peak, as many North Koreans of modest means might have, they now know what it feels like to own real estate in the US. Unfortunately, there is no insurance, options, or other hedges available for North Korean entrepreneurs to diversify their holdings, so asset bubbles probably hurt much more than in developed economies.

From the Daily NK:

An inside source from North Hamkyung Province said in a phone conversation with Daily NK on June 19, “Some people started hoarding huge volume of rice after hearing the rumor that the price of rice would go up as high as 5,000 won/kg. However, these people are now suffering heavy losses as the price has plunged dramatically lately. ”

The source said that around mid-late March this year, the price of rice started rising and a rumor began to circulate in the market that the price of rice would rise as high as four to five thousand won per kilogram. It was about that time when people with big fortunes started stockpiling rice, which further contributed to the increase of rice price, the source said.
“Around the end of May, rice price started falling dramatically because another rumor began to circulate that rice aid from foreign countries would arrive at Nampo Port and merchants, upon hearing the rumor, rushed to bring out their rice for sale,” the source said. “Right now, those who borrowed money from family and relatives to hoard rice are going crazy over the situation,” the source added.

As of June 17, the price of rice in major border cities of North Korea ranges between 2,100 won/kg and 2,500 won/kg. In fact, the price of rice dropped almost by half in the last one month.

This is not to suggest that food is now plentiful in North Korea and we are seeing a necessary downward adjustment in prices, but rather a demonstration of the volatility of North Korea’s markets.  Prices disproportionately rise and fall on rumors because there is no way to easily verify information.  North Korea has neither a mercantile exchange, futures contracts, nor an effective communications or transportation system.  Simply dealing with these initial problems would go a long way towards stabilizing and rationalizing food prices. 

UPDATE: On June 9, a Good Freinds report was published in Yonhap which indicated China increased its quota on food exports to the DPRK.

To read the full article, click below:
Rice Price Falls by Half, Bringing Misfortune to Traders Hoarding Rice
Daily NK
Lee Sung Jin


North Korean film update

Sunday, June 22nd, 2008

The Korean Film Council in Seoul analyzed North Korean films and TV dramas recorded between 2000 – 2006.  As discussed in an earlier post on this topic, initial findings indicate North Korean films made during this period differed tremedously over earlier years in that they portrayed real-life situations including husband-wife conflicts and generational differences (see A School Girl’s Diary).  

In the 1970s, films depicted the achievements of the two leaders. In the 1980s, works portrayed the happiness of citizens living in ‘our socialist society’.  The first kiss appeared in the 1980’s film, Snow Melting in the Springtime (봄날의 눈석이).  After Kim Il Sung’s death, films began to reemphasize the revolutionary tradition. The works focusing on the Kim Il Sung and Kim Jong Il revolutionary achievements were produced in order to strengthen the spiritual training of citizens.   

Read more here:
No Love Scenes or Love Triangles in NK Dramas
Daily NK
Yang Jung A


Kim invited to attend Olympics

Sunday, June 22nd, 2008

Acording to the Korea Times, China invited Kim Jong il to attend the opening ceremony of the 2008 Olympics.  President Bush and Japan’s Prime Minister, Yasuo Fukuda, are still mulling their invitations.

Read the full article here:
‘North Korean Leader Invited to Beijing Olympics’
Korea Times
Kim Sue-young


The Way to Survive for Farmers

Saturday, June 21st, 2008

Daily NK
Jung Kwon Ho

The price of rice in the jangmadang has been on the decline since June. The rice price which had risen to 3,000 won at one point is now at 2,400 won per unit (1kg in North Korea), which was the standard in the beginning of April. With the upcoming potato harvest season and spreading the news that U.S.’ food aid will come, the forecast has also been proposed that the food crisis will be mitigated from a climax in mid-June. However, even though it is not at a life and death situation, the hunger of citizens still continues. The Daily NK, through the testimonies of three witnesses who came out of North Korea between May and June, got a glimpse into the lives of North Korean citizens.

Mr. B is a farmer in a county, Hwanghae Province. He met with a reporter while visiting relatives in China early last month, when the food shortage was severe in North Korea.

B said that food in Hwanghae Province, traditionally a granary area, is absolutely insufficient. Since the mid-90s, food has not been adequately distributed and a vicious cycle of food crisis and a lack of an effort by farmers have been occurring.

Regarding the cause of the reduction in the volume of food production, B noted, “You could possibly name several reasons, but the most important factor is the lack of earnestness by farmers. It is difficult to find people who work with consciousness. There is no reason to work, because even if people work hard, there is no food provision. In the 80s, before Kim Il Sung’s death, the estimated corn yield per unit of an area (approx. 2.45 acres) was even up to 10 tons. After his death, the yield has been about 3 tons per unit area.”

In June in Hwanghae Province, the reaping of wheat and flour begins. Accordingly, the food crisis can temporarily recover. If wheat and flour are produced, around 20 kilograms are distributed. However, these are excluded from the total distribution from the autumn harvest.

He stated that North Korean farmers have been finding a way to get by on their own for last 10 years after the March of Tribulation in late 1990s, due to the unstable food provisions. He cited three methods of survival for farmers in Hwanghae Province: “private farming, pilfering grains of farms, and doing business.”

Furrows are allocated to farmers for private farming

Because distributed food for individuals has not been enough, he said that land has been allocated according to the number of family members so that private farming could be carried out. This means, the authorities distribute no filed of the farm, but furrows and footpaths in the farm, so that farmers could plant peas or potatoes between crops.

“The state was supposed to provide 280kg of unpolished grain after a year of farming by the farmers, but only 120~130 kg are provided, which is not sufficient for the year. So all kinds of other crops are planted in the furrows and shared among the people. Furrows do not have to be registered with the state, so they can be operated independently. In Jaeryong County, Hwanghae Province, such methods have first been adopted. Half of the Province has started to employ this method.”

In actuality, the production volume of potatoes planted among corn furrows exceeds that of state potato farms. Mr. B said, “Farmers are zealous about planting potatoes in the furrows, because it has to do with private profits. They share over 50kg amongst each other. This helps get over the difficult month of June.”

Mr. B said that 150kg of food was produced from private field cultivated on an inclined plane of a mountain and in his home site. He said, “After discussions with the mountain surveillance directors, they have agreed to give a 30% of their production, even plant some trees, and engage in farming. If the deal is not kept, however, the steep land on mountains is not given to them for the subsequent year.”

B explained that besides private farming, another critical method of survival for the citizens in Hwanghae Province is pilfering grain under the control of the state. For several years, national provision has not been carried out properly, so coping methods by farmers have also become more aggressive.

He said, “Before harvesting officially the farm’s crops, farmers pilfer grains on fields every night. These stolen grains are actually their lifeline for the next year. Farmers are saving corn and rice for a year in this way.”

He said that the amount of food secured by farmers via such a method is different from person to person, but in the Jaeryong plain, people have been able to secure up to one ton of food. Through that rice, people are able to acquire daily necessities and send them to relatives in the cities.

During falls in North Korea, it is a well-known fact that the farmers and the state frequently scramble for grain. As a result, the North Korean authorities, since three years ago, have dispatched nation widely the People’s Safety Agency Political College students and have engaged in food recovery operations.

“Hide the food in a pigsty.”

B said, “Even a few years ago, there were a lot of people whose food were confiscated by the students, but the situation is different now. However, even last year, food was not preserved in the homes, but was hidden under the floor of pigsties or buried underground and covered with garlic fields. During last year’s harvesting season, the citizens benefitted this way and have been able to get by until now.”

However, he said that people who are who is honest and forthright or the elderly inevitably have a difficult time in the battle for pilfering grain.

Mr. B added, “Going out to the fields at night and gathering enough food before the harvesting period is a life and death matter. Without stealing, one ends up starving, so who would just sit there?.”

He additionally introduced a different style of persons belonging to a farm besides farmers. He said “There are about five traders in agricultural districts per work unit which consists of 50 households.” According to him, the managers of work units call them “8.3.” The name stuck after Kim Il Sung’s decree on August 3rd that necessities of daily life were to be independently produced in factories or work units. These people are often deployed by farms to be in charge of civilian projects ordered by the state. When the state demands necessary commodities, money or food from farmers under the pretext of support for the army or national construction, these traders take charge of the management.

They are the ones who go around to secluded villages and purchase 2~3 tons of corn and pea from the villagers in exchange for rice, oil, seasonings and flour, which usually produces a profit of 50 to 100 won per kg. But they have to sell over 15kg per day in order to buy a kilogram of corn.

B said, “Most of the people get by from private farming, theft, or doing business, but a minority do not even have any know-how to do that, so are in adversity. They have to endure the spring shortage period, skip meals, or eke out an existence on porridge. As a last resort, they borrow food at a high rate of interest and get by. Such a pattern is repeated the next year, so their debt only increases and they end up in even more desperate situations.”


North Korea’s continuing social change

Friday, June 20th, 2008

The Daily NK posted a fascinating interview with a local North Korean merchant.  He provides interesting anecdotes of everyday life:

Tongil Market (Featured in A State of Mind):

Nowadays, the way to survive is selling in the jangmadang (market). With the exception of the residents of the Joong-district and its vicinity, who are often mobilized to national events, seven out of 10 households do business in the jangmadang. In the Pyongyang Tongil (unification) Market alone, the number of people doing business is between 5,000~6,000 people. The size of a street-stand is approximately 50cm by 50cm large. There are also about 2,000 people selling outside of the market.”

“There are people also selling in the alleyways. The Tongil Market usually consists of people from the Tongil Street, so merchants from the other regions cannot do business there. In the Tongil Market alone, there are around 8,000 people [doing business]. Because the Market is so large, the cadres from the other regions frequently come to buy goods.”

Even in North Korea, capital enhances worker productivity: 

Mr. A said that in the markets, the sale of industrial goods (all kinds of products such as clothing brought from China) and cosmetics are supposed to be lucrative. The traders usually bring in about 5,000 won per day and 15,000 won per month. Such an amount of money can buy about 2kg of rice per day. The people who make a lot of money are the marine product merchants. They make around 7,000~8,000 won per day. Marine products are often purchased by officials who have money and rice.

The people in the lowest class do not have the capital to do business, so a majority of them sell noodles or food. They make about 1,500 won per day, which can purchase about a kilogram of corn. People who sell food sell rice, sidedishes, and snacks on site. To them, selling is a battle to survive.

Coping mechanisms:

Mr. A relayed that not-so-affluent households raise several domestic cattle, collect medicinal herbs or brew liquor to sell. The remnants of the liquor are used as livestock feed. Selling two bottles of liquor made of corn as raw material generates about 500 won in profit. However, the authorities have strictly been regulating brewing liquor in homes, resulting in difficult situations. If exposed for making liquor, both the person-in-charge and the People’s Party Unit chairman are banished to the countryside.

Beekeeping is seasonally supposed to be lucrative. In May when the acacia flowers start to bloom, the number of people who collect honey in the mountains increases. In the surrounding areas of Pyongyang, there are at least trees on the mountains, so beekeeping has been feasible. One person can collect about 100kg of honey per month by keeping around 15 beehives. The honey is usually consumed by people who want to use it in medicine or by officials.

Work overseas:

“The utmost goal of workers in Pyongyang is to go to another country to earn money. Recently, they have even gone to the Middle East, Southeast Asia, Africa, and the Democratic Republic of Congo. Once they leave, they do not return for three years. They can go back or stay in Pyongyang. Workers who have gone to Russia or to Congo for farming come back with 10,000~20,000 dollars in three years.”

“With that money, they can buy a house and prepare a significant amount of capital for business. Those who have gone abroad not only do the work ordered by organizations, but also engage in private farming, do business and save as much money as they can. There have been a quite a few people around me who have gone abroad recently to make money this way. Out of 100 male workers, there is at least one or two. In order to go overseas, one has to pay 300~400 dollars in bribes.”

Read the full article here:
Doing Business Is a Battle
Daily NK 
Jung Kwon Ho


DPRK food prices falling?

Thursday, June 19th, 2008

The Daily NK reports food prices are falling in North Korea on news that international aid is due to arrive—proving that although the politics might not make much sense, the economic actors are rational: 

The price of rice in Pyongyang ha[d] risen to 3,000 won per 1kg, but since late May, the high-quality polished rice has been around 2,500 won, the medium quality rice around 2,400 won and unpolished brown rice around 2,300 won. Wild rice imported from Northeast Asia has been around 2,300 won. [Which was the price in April].

The price of corn is still around 1,500 won. Rice is not lacking in the jangmadang [markets], but corn has been. The reason for that is that last year, there was a rumor that planting soy and making tofu is lucrative, so everyone planted soy instead of corn.”

UPDATE: The article does not suggest that the food situation is getting better.  People are also economizing their consumption which mutes demand to some degree (eating two meals a day for instance). 

Read this very interesting article here:
Doing Business Is a Battle
Daily NK 
Jung Kwon Ho


Russia donates food to DPRK

Thursday, June 19th, 2008

After China and the USA made high-profile food donations to North Korea, the Russians finally joined the game.  Russia’s Foreign Minister claims that by the end of June his country will have sent 3,000 tons of flour to UN World Food Program distributors in North Korea. The first aid deliveries arrived in North Korea by train on June 11.

I am surprised Russia waited so long to get into the game.  Russia has been prodding North Korea to link its Trans-Siberian rail traffic to South Korea, and they want to make sure the Chinese don’t squeeze them out of North Korea’s Raijin Port (which does not freeze in the winter).  Food aid might not have helped these processes along, but waiting so long to jump on the bandwagon can’t have helped. 

In March of this year, the Russians inked a deal to renovate the railway lines between their border and Raijin (the tracks are different gagues).

Read about the aid here: 
Russia to deliver 3,000 tons of flour to North Korea

Russia sends food aid to North Korea
Associated Press


DPRK economy shrinks for second year: Bank of Korea

Tuesday, June 17th, 2008

North Korea does not publish economic data.  The size of North Korea’s economy is estimated by South Korea’s Central Bank (Bank of Korea), the US Central Intelligence Agency (CIA), and other think tanks such as the Sejong Institute (Lee Jong Seok)

According to a recent report by the Bank of Korea, North Korea sufferd its second full year of economic contraction (as defined by GDP), 1.1% in 2006 and 2.3% in 2007.  The bank estimates North Korea’s 2007 gross national income (GNI/GNP) at $26.7 billion, per capita GNP at $1,152 (assuming population of 23 million).  If you are interested in knowing the difference between GNP and GDP, click here.

Here are some highlights from the report:

Agriculture, forestry & fisheries marked a 9.4% decrease following a 2.6% decrease in 2006

Mining increased 0.4% in 2007, down from 1.9% increase in 2006

Manufacturing increased 0.8%, higher than 0.4% 2006 increase. -1.7% growth in light industry, due to the decrease in food products and beverages. +2.3% growth in heavy industries led by expansion of metal and machinery products.

Electricity, gas & water production increased 4.8%, (+2.7% in 2006), from hydroelectric and steam power generation.

Construction production -1.5%, (-11.5% in 2006), from reduced non-housing construction and civil engineering.

Services +1.7%, (+1.1% in 2006). Hotel, restaurant, transport, post & telecom industry expanded.

Trade volume (goods) fell 1.8% to $2.941 billion, 1/248 South Korea’s. Exports fell 3.0%, imports fell 1.3%.

These estimates are based on trade figures obtained from the Korea International Trade Association, Korea Trade and Investment Promotion Agency, fuel and food aid figures from aid groups such as the International Red Cross and the World Food Program, as well as information provided by frequent visitors.

More information here:
Full report by Bank of Korea  and data (recomended)

North Korea’s Economy Shrank in 2007, Second Annual Contraction
Heejin Koo


How much food do they need?

Tuesday, June 17th, 2008

A few weeks ago, I speculated that no one knows how much food the North Koreans really need, even the DPRK government.

On one side of the debate, the UN World Food Propgram claims that North Korea has a 1.67 million ton grain shortfall leaving 6.5 million individuals at risk.  These are North Korea’s numbers and the WFP/FAO is required to accept them.

On the other side of the debate, Marcus Noland and Stephan Haggard argue the DPRK’s grain shortage is closer to 100,000 metric tons.  The discrepancy arises because the UN’s estimate is based on individuals needing 460 grams of grain per day to sustain life, but in reality, grains are supplemented by potatoes and other vegetables, lowering the amount of aid needed to sustain the population.  Their calculations are explained here.

South Korea’s National Intelligence Service and Ministry of Unification buttress the Noland/Haggard assertion that things are not as bad as the UN numbers suggest (Daily NK). 

In an effort to document the state of affairs via field research, the UN WFP is conducting a survey across 50 counties in the DPRK.  According to the BBC:

Staff from the UN World Food Programme have been given rare access to North Korea’s countryside to assess the seriousness of food shortages there.

The audit, being carried out across more than 50 counties, comes at a critical time.

Some recent reports suggest that the country may be on the brink of famine.

North Korea is estimated to have a shortfall of 1.6 million tonnes of grain because of last year’s flood-affected harvest.

But a true picture of the scale of the crisis is very difficult to determine.

Twelve WFP staff and eight US aid agency workers are now fanning out through North Korea, albeit with government minders, visiting hospitals, schools and individual households.

Their work is expected to take two weeks, by which time the world should have a much clearer understanding of the true nature of North Korea’s food crisis.

Here is the World Food Program’s North Korea Page.  I have not found anything on the survey team, methodology, or operations.  I will post something here if I do.

Read the full artilces here:
Balance of Principle and Flexibility Are Needed When Providing Food Assistance to North Korea
Daily NK
Choi Choel Hee

Asia’s Other Crisis
Stephan Haggard and Marcus Noland

UN assesses N Korea food supply
John Sudworth


The People’s Safety Agency’s Authority Is Strengthened

Tuesday, June 17th, 2008

Daily NK
Moon Sung Hwee

The Central Committee of the Chosun (North Korea) Workers’ Party recently commanded the People’s Safety Agency (PSA) to increase its authority.

A source from North Korea reported in a telephone interview with Daily NK on the 11th that “According to a document from the Central Committee of the Party, the legal authority of agents of the PSA is being strengthened.”

The source explained that “From now on, agents of the PSA can investigate every criminal offense committed by the military, the National Security Agency, the public prosecutors and cadres of courts. This command from the Party was delivered to the cadres’ lectures over the country on May 10.

The most remarkable part is that in every field except anti-nation or anti-regime crimes the PSA can inspect and search the houses of suspects from the military, the Party, the NSA and the public prosecutor’s office.

Through this, control over the military, which abused its power and was acknowledged as a public enemy by average residents for a decade under the military-first policy, is being systematized.

The document stated clearly that the PSA has the right to detain anyone who disobeys the agents’ onsite inspections in their homes and even to arrest them, according to the source.

One proviso only was added that when the agents undertake a house search of the cadres of the Party, they have to receive prior approval from upper levels within the PSA and they do not have the authority to arrest cadres of the Party on the spot as a suspect.

The source explained that up to this point general crimes committed by soldiers were just dealt with by the military police or the Defense Security Command of the People’s Army. Since the Shimhwajo Case in 1998, the PSA has not examined the cadres of the NSA or prosecutors.

The source relayed that regulations regarding punishment towards agents who intentionally overlook an inspection or who leak information on an inspection are specified in the document.

Since Jang Sung Taek, a brother-in-law of Kim Jong Il, led the Ministry of Administration of the Chosun (North Korea) Workers’ Party, the political authority of the PSA accordingly started being strengthened. The source explained that “In the past, the PSA was not able to intervene in any case without the permission of the prosecutors, but since October 2007 the agents of the PSA were granted the authority to deal with the arrest of criminals and with sending them to court themselves.

The position that Jang Sung Taek took in October 2007 was that the Director of the Ministry of Administration of the Chosun (North Korea) Workers’ Party is responsible for general public security organizations such as the National Security Agency, the People’s Safety Agency, the Central Prosecutor Office and the Special Court.

The source analyzed that “The Party did not push legislation on the expansion of the authority of the PSA, because political conflicts with other governmental organizations would be brought out.”

Some say that the background to the promotion of the PSA stems from Kim Jong Il’s fear that the authority of the NSA and of the military were too big while the Party’s power was extraordinarily weakened.

One other source said that “Although the military or information organizations have attempted many coups in human history, the police force has always sided with the government. Therefore, Kim Jong Il drastically strengthened the authority of the PSA.”

The source added that “Regarding the promotion of the PSA, the cadres of the Party took concrete examples of assassinations such as Nicolae Ceauşescu of Romania and Park Chung Hee of South Korea, emphasizing the Romanian police’s fight against the military in order to protest Ceauşescu.”

“The People’s Safety Agents,” which is a newspaper circulated just in the PSA, and lecture materials for the PSA lately describe the PSA as the “escort warrior for the General” or “the second Escort Bureau,” the source explained, regarding the change of the PSA’s state.