November « 2015 « North Korean Economy Watch

Archive for November, 2015

Fall 2015 price reports

Tuesday, November 17th, 2015

According to the Daily NK:

Recently in Yanggang Province, as both Kimjang and the harvest season draw to a close, the price of vegetables and rice has gone down, and with winter right around the corner, fuel prices have begun to rise.

“As we enter in November, the price of vegetables and rice are falling, and with the end of the Kimjang season and the beginning of rice threshing, market prices are fluctuating wildly,” a source in Yanggang Province reported to Daily NK on November 16th. “Families, preparing for winter now that Kimjang (making of kimchi for the season) is over, are using servi-cha for business regularly and the price of oil is also rising accordingly.”

An additional source in the same province corroborated this news.

At the height of Kimjang season in mid-October, cabbage was trading at 1,950 KPW (0.23 USD) per 1 kg, but by the end of October it had dropped to 1,500 KPW (0.17 USD), and now it has dropped further still to reach 900 KPW (0.10 USD) per 1 kg. Rice has also dropped from 5,200 KPW (0.60 USD) to 4,700 KPW (0.55 USD) per kilogram.

As North Korea moves to wrap up its fiscal year, residents who failed to complete their assigned tasks must make payments to fulfill their duty. Those without the money hand over part of the harvest from tending their personal plots to market sellers for cash and turn that in instead. The flood of harvested goods at the markets has thus driven down prices.

Our source tells us that in mid-October, using Hyesan City as the standard, petrol was trading at 6,000 KPW (0.70 USD) per kilogram and diesel fuel at 4,000 KPW (0.47 USD) per kilogram. But since the beginning of November the prices increased to 7,000 KPW (0.81 USD) for petrol and 4,500 KPW (0.52 USD) per kilogram for diesel. In mid-November prices have increased to 7,300 KPW (0.85 USD) per kilogram for petrol and 5,250 KPW (0.61 USD) per kilogram for diesel.

As the icy winter draws closer, hot foods are selling particularly well and the price of potato noodles, corn noodles, and others are more expensive compared to last year. Last year a small bowl of noodles was 1,000 KPW (0.12 USD) while a large bowl cost 6,000 KPW (0.70 USD); this year, small bowls of noodles are selling better than large bowls at a cost of 1,500 KPW (0.17 USD).

Read the full story here:
Veg, rice prices fall on back of ‘kimjang’
Daily NK
Kang Mi Jin
2015-11-17

Posted in 2015 Food Shortage, Agriculture, Agriculture statistics, Automobiles, Food, Price liberalization, Statistics, Transportation | Comments Closed

Koreas, Russia start third test run for Rason coal shipments

Tuesday, November 17th, 2015

According to Yonhap:

South and North Korea kicked off another test operation Tuesday of their joint logistics project to ship Russian coal to the South through a port near the border with Russia, government officials said.

Some 120,000 tons of Russian coal will be delivered to three South Korean ports on a ship from the North Korean port city of Rajin after being transported from Russia’s border city of Khasan on a re-connected railway in the third run of the so-called Rajin-Khasan logistics project. The trilateral project will be carried out until Nov. 30.

It is a symbol of three-way cooperation at a time when inter-Korean exchanges have become stagnant following the deadly sinking of a South Korean warship by the North in 2010.

In November 2014, the first shipment carrying 40,500 tons of Russian coal smoothly arrived in South Korea in the first operation of the project. The second test was conducted in April.

The initiative involves three South Korean firms — top steelmaker POSCO, shipper Hyundai Merchant Marine Co. and state train operator Korail Corp.

A group of some 20 government and company officials are set to cross the border between Russia and North Korea on a bus later in the day after they departed from Vladivostok a day earlier, according to the Unification Ministry.

They will stay in the North’s city till Friday to check the Rajin port’s capacity to handle shipments and to see how smoothly vessels can be berthed there, the ministry said.

The South Korean firms will decide on whether to clinch a formal contract based on the outcome of the pilot operation. It is highly likely that the signing of a formal deal could be delayed into next year.

“It is unclear when the formal contract could be signed,” said a ministry official, asking not to be named.

The project is also part of President Park Geun-hye’s vision for a united Eurasia, known as the Eurasia initiative, which calls for linking energy and logistics infrastructure across Asia and Europe.

The project is regarded as an exception to South Korea’s punitive sanctions on the North, which has suspended almost all trade and exchange programs, apart from a joint factory park project in the North’s border city of Kaesong.

Read the full story here:
Koreas, Russia start third test run for logistics project
Yonhap
2015-11-17

Posted in Coal, Energy, Railways, Russia, Sea shipping, South Korea, Transportation | Comments Closed

North Korean authorities using market prices for policy

Monday, November 16th, 2015

According to the Daily NK:

The North Korean authorities officially determine product prices in North Korea. However, according to inside sources, these prices are being ignored more and more in favor of prices determined by market forces. Instead of official price designations, the authorities have posted ‘price ceilings,’ but they are not strictly enforcing them.

In a telephone conversation with the Daily NK on November 13th, a source from North Hamgyong Province said, “Official prices have almost completely disappeared from the markets. Reflecting this trend, even the market management offices located in each official marketplace are listing ‘price ceilings’ instead of official prices.”

Daily NK spoke with a source in South Hamgyong Province who confirmed this to be the case there as well.

“Furthermore, the price ceilings are being determined by the market rates, so the meaning of these regulations is fading. For example, if the going rate for rice at any given time is 5,000 KPW [0.58 USD] per kilogram, than the price ceiling would be set at something like 4,500- 5,000 KPW [0.52-0.58 USD],” she said.

“These ceiling prices are indeed posted, but they are not enforced. Ministry of People’s Safety [which act as the North’s police forces] officers are not able to command merchants to lower their prices. The atmosphere is such that if they even tried, they would likely be insulted and cursed at by the vendors.”

She added, “At the market, it has been quite some time since people realized that the official prices are meaningless. If a buyer asked a merchant for the official price of a given product, that merchant would likely to scold the buyer for not having proper control of his mental faculties.”

In a true indication that the national prices are being disregarded on a wide-scale level, even the authorities have shown signs that they are interested in understanding how market rates work.

For example, from Provincial People’s Committees, cabinet ministers are being kept abreast of the local market rate for product prices on a daily basis. “They are trying to understand the exact market prices for given quantities of goods like electronics and foodstuffs,” the source explained.

When asked to describe how ordinary North Korean folks were reacting to this news, she said, “People are saying things like, ‘The authorities explain that they want to understand rice prices so they can think of measures to improve the lives of the people, but that just makes us laugh. The best thing they can do to help is to stay out of the way.’”

Read the full story here:
Authorities tacitly recognize market-determined prices
Daily NK
Lee Sang Yong
2015-11-16

Posted in Black markets, Economic reform, Fiscal & monetary policy, General markets (FMR: Farmers Market), Price liberalization | Comments Closed

DPRK announces new EDZ (SEZ) regulations

Sunday, November 15th, 2015

According to the Pyongyang Times:

Regulations on tax in EDZ worked out

Regulations on Tax in Economic Development Zones have been published pursuant to the August 19 decree of the Presidium of the Supreme People’s Assembly.

The regulations have 11 chapters and 72 articles.

According to them, they are applicable to foreign-invested businesses, foreign individuals and overseas Koreans that conduct business transactions or earn income in EDZs, and tax supervision in the zones will be conducted by relevant taxation institutions under the guidance of the central taxation organ.

Enterprise income tax rate is 14 per cent of the net profits, or 10 per cent in case of the priority sectors.

Tax rate on remuneration will be 5 to 30 per cent of the amount of income, if the monthly amount of income is higher than 500 euros, and that on the income from donation 2-15 per cent if the amount of income is greater than 5 000 euros.

Property tax rate is 1 per cent on buildings and 1.4 per cent on vessels and planes, and the property owner is required to submit the application for registration of property to taxation institutions within 20 days of property ownership and register the property.

Individuals who have inherited properties in EDZs and residents in EDZs who inherited properties outside EDZs are bound to pay inheritance tax and the rate is 6 to 30 per cent.

Turnover tax rate is 1-15 per cent of the sales proceeds of products or income from construction work guidance and 16 to 50 per cent in case of defined luxury articles.

Service tax rate is 1-10 per cent, and up to 50 per cent tax rate is applied to special entertainment category, but it is reduced by 50 per cent for businesses engaged in the latest science and technology service sector.

Resource tax rate varies from 1 to 20 per cent according to its kinds and it may be exempted in case the resources are exported in the form of processed products with high value based on modernized technological processes, or sold to local institutions, businesses and organizations by government measures.

It may be reduced by 50 per cent in case the businesses engaged in the special priority sector uses underground water for production.

City management tax rate is 1 per cent and businesses and individuals must pay vehicle taxes on the use of cars and other road vehicles.

Read the full story here:
Regulations on tax in EDZ worked out
Pyongyang Times
2015-11-15

Posted in Economic Development Zones (2013), Economic Development Zones (2014), Economic Development Zones (2015), Fiscal & monetary policy, Special Economic Zones | Comments Closed

DPRK Defectors down in 2015

Saturday, November 14th, 2015

According to the Korea Times:

The number of North Koreans who defected to South Korea this year fell below the monthly average of 100 for the first time in 12 years, the Ministry of Unification said.

Ministry officials attributed the decline to sharply tightened security along the Sino-Korean border and to an improved economic situation in the North by reinvigorated private markets, among other things, which they said are some of the biggest changes since Kim Jong-un took office four years ago.

According to the ministry tally, the number of North Koreans who were officially tagged with the defector status in the first 10 months of this year totaled 978, for a monthly average of about 98. It is the first time the figure has fallen below 100 since 2003. A ministry official estimated the total would not exceed 1,200 this year, less than half that of 2009 when the number of defectors peaked at 2,914.

The biggest reason for the decline of escapees is sharply enhanced border security by toughening the punishment of negligent or corrupt guards while more handsomely rewarding guards who arrest would-be defectors. This pushed up the amount of the bribes escapees must pay the guards to cross the Tumen River from about 5 million South Korean won to as high as 17 million won in some areas, officials said.

Other analysts find the reason in the gradual improvement of economic conditions in the isolationist state. “There are more than 400 markets in North Korea,” said one researcher at a state think tank. “As residents began to make their own money, they feel it far less necessary to risk their lives to get out of North Korea.”

Some North Korea watchers also ascribe the recent surge in the defection of the North Korea elite, including party cadre and diplomats, to revitalized markets in the North. “As the North Korean markets expanded, the fights among the power elite have also intensified to take larger shares of financial gains,” said Prof. Cho Dong-ho of Ehwa University in an interview with Chosun Ilbo daily. “Those who lose in these battles or are found to be involved in corruption have increasingly deserted their country.”

During a parliamentary audit last month, Lee Byung-ho, chief of the National Intelligence Service, also said, “Up to 46 North Korean diplomats have left the North and entered South Korea over the past three years.” Some ranking officials of the Workers’ Party escaped to the South along with their entire families based on elaborate plans they had set up over several years. There are even defectors who have several billions of South Korean won, bought apartments in southern Seoul and drive imported cars.

Read the full story here:
Number of N. Korean defectors on steady decline
Korea Times
Choi Sung-jin
2015-11-14

Posted in 2015 Emigration Statistics, Emigration | Comments Closed

North Korea boasts of ‘world-class cosmetics’

Friday, November 13th, 2015

Institute for Far Eastern Studies (IFES)

As reports in North Korea continue to pour out boasting about the improvement in the quality of its cosmetics, it appears that Kim Jong Un’s instructions to raise the quality of cosmetics suited to the tastes of consumers have achieved some results.

On November 5, 2015, the North Korean external propaganda site ‘DPRK Today’ posted an article about the 26th National Exhibition of Consumer Products, which was held in Pyongyang from October 26-30. The website reported, “The Pyongyang Cosmetics Factory and Sinuiju Cosmetics Factory submitted more than 80 types of cosmetics and hundreds of products to the exhibition, which felt like the site of a fierce technology competition.”

‘DPRK Today’ cited products on display such as soap, beauty cream, shampoo, and conditioner. “The brands were very distinctive, and the packaging has also changed. There were also many new eye-catching products,” the website reported.

The article also referenced the cosmetic industry’s slogan, ‘World-Class Cosmetic Products—More, Better, Faster,’ and emphasized that the “goals and rate of progress of our cosmetics industry have changed. Those dreams were placed on many products displayed at the exhibit.” In order to achieve these goals, the Pyongyang Cosmetics Factory as well as the Sinuiju Cosmetics Factory are “constantly shortening the technology renewal cycle by modernizing the production process and better managing technological capabilities,” the website explained.

Back in May 2015, the Choson Sinbo, a pro-North Korean newspaper in Japan, reported that the Pyongyang Cosmetics Factory was producing functional cosmetics with ‘natural’ and ‘hypoallergenic’ qualities. It mentioned the ‘Unhasu’ brand and stated that products such as beauty cream, lotion, and foundation had already been developed.

The newspaper also claimed that the biotechnology division of the State Academy of Sciences had used stem cells to develop cosmetics with anti-aging, moisturizing, and whitening effects.

Prior to this Kim Jong Un had visited the Pyongyang Cosmetics Factory in February 2015, where he issued instructions to raise the quality of cosmetics. “We need to make it so that our people prefer Unhasu products to foreign-made cosmetics, and further, so that Unhasu cosmetics become the talk of the global market,” he exhorted factory employees.

Posted in Cosmetics, Light Industry, Manufacturing | Comments Closed

Tumen Triangle tribulations: The unfulfilled promise of Chinese, Russian and North Korean cooperation

Thursday, November 12th, 2015

Andray Abrahamian has published a report with the US-Korea Institute on developments in the Tumen Triangle.

Here is the report description:

The Tumen Triangle region-where North Korea, China and Russia meet-is, in many ways, the story of regional integration being held back by the political concerns of Pyongyang, Beijing and Moscow. There are long-term forces at work here, such as Moscow’s concerns over Chinese dominance in the sparsely populated Russian Far East. This legacy of mistrust frames cross-border interactions and despite recent warm relations, major cross-border cooperation remains limited.

In this USKI Special Report, Andray Abrahamian, Director of Research at Choson Exchange examines historical legacies, contemporary relations and shifting strategic priorities between the three countries. The report then focuses trade and investment in the Tumen Triangle region, particularly how the Yanbian Korean Autonomous Prefecture and Primorsky Krai interact with and affect Rason Special City, the center of the Rason Special Economic Zone.

You can download the report here (PDF).

Posted in Economic reform, Foreign direct investment, International trade, Tumen River Area Development Programme (TRADP), UNDP | Comments Closed

Camp 16 imagery update

Thursday, November 12th, 2015

UPDATE 1 (2015-11-18): There was some follow-up media coverage of this work that claimed Camp 16 is about half the size of Pyongyang. This is not the case. Here are the actual statistics comparing the geographical sizes of Camp 16 and Pyongyang [Measures are approximate using Google Earth measuring tools]:

Pyongyang has 230 mile (371km ) perimeter and area of 679 sq miles (1758 sq km).
Camp 16 has 72 mile (115 km) perimeter and area of 212 sq miles (548 sq km).

So Camp 16 is approximately 31% the current size of Pyongyang. If we included Sungho, Sangwon, and Junghwa, which were moved into North Hwanghae Province, the percentage would drop even further.

ORIGINAL POST (2015-11-12): I previously wrote about Camp 16 in Myonggan here (2013-7-19). Now Google Earth has updated the imagery of Camp 15 with satellite pictures dated 2015-11-2 and 2015-10-15. I reported some of the changes in this RFA report this week, but here they are again…

1. New small hydro power plant. The North Koreans built a dam, drainage canal and small power station near one of the camp’s production facilities:

Here is a close up of the plant and a nearby factory that appears to be operational:

2. New housing and possibly a sports field. A new apartment block was built in the camp. It appears to be nearly 160m in length and is composed of just a couple of stories. The building behind it that is probably for livestock. The picture also reveals what appears to be a sports field of some kind next to the housing. The image is not very clear, so this could be something else, but I am not sure what.

Here is a closeup of the “sports field”. If you have a better idea what this is, please let me know.

3. New fish farm. The fish farm is small, just over 1,100 sq meters surface area.

4. Housing Razed. Just north of the fish farm some buildings, which could be small homes or workshops, appear to have been razed:

5. Evidence of continued mining and logging. Below we can see evidence of mining activity since 2013.

Here are piles of felled trees which indicate the mine also exports lumber:

If the minerals that are mined and the lumber that is harvested are exported for hard currency, the transaction would likely involve a trade company under the control of the Ministry of State Security (MSS, SSD, NSA), however, I am not privy to the details of those transactions.

Posted in Google Earth, International trade | Comments Closed

North Korea’s “Epic Economic Fail” in International Perspective

Wednesday, November 11th, 2015

A new report by Nicholas Eberstadt has been published by the Asan Institute for Policy Studies. According to the summary:

This report brings to the table new research on the dimensions of economic failure in modern North Korea, offers a quantitative view of how nations develop in our modern world, and where North Korea’s awful slide downward fits within this global tableau; offers admittedly approximate long term estimates of overall net resource transfers to the DPRK, including estimates of net transfers from the major state benefactors; and some indications about the interplay between concessionary resource transfers from abroad and the DPRK’s domestic economic performance. It concludes with some observations about the implications of these findings

You can download a PDF of the report here.

Posted in GDP statistics, International Aid, International trade, Statistics, Trade Statistics | Comments Closed

South Korean intelligence says North Korea has 380 markets

Wednesday, November 11th, 2015

By Benjamin Katzeff Silberstein

According to Yonhap, South Korean intelligence counts the markets in North Korea to 380:

Growth in marketplaces in North Korea can serve as a catalyst for improving frayed inter-Korean ties as they will prod the North into carrying out reform and liberalization, analysts said Wednesday.

But they also said whether North Korea is willing to give up its nuclear weapons program will be a major point of consideration for South Korea in deciding ways to spur inter-Korean economic cooperation and ease Seoul’s economic sanctions on Pyongyang.

The North has operated the state-controlled rationing system for a long time. But marketplaces have gradually increased since the mid-1990s as North Koreans had to find sources of survival following a severe famine and economic hardship, widely known as the “Arduous March.”

In a recent annual audit session, South Korea’s spy agency told lawmakers that around 380 markets exist across the North that help instill market capitalism in ordinary North Koreans.

One has to wonder exactly what it means to “instill market capitalism” into people…

UPDATE: Curtis Melvin has counted 406 formal markets in North Korea (not counting street markets) using satellite imagery.

Full story here:
N.Korea’s burgeoning market economy to help warm inter-Korean ties
Yonhap News
11-11-2015

Posted in Agriculture, Political economy, Statistics | Comments Closed

North Korean Economy Watch