North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-03-12-1
3/12/2010

As the spring lean season approaches, the black market exchange rate for North Korean Won continues to grow, while the prices of rice and other necessities are increasing proportionately. Immediately following last year’s currency reform (November 30), rice was sold at 20 Won per Kg, while it cost 400~600 Won at the end of January and has grown to as much as 1000 Won per Kg in early March. In other words, the cost of rice has jumped 50-fold since the currency reform, negating most effects of the ‘100 to 1’ devaluation reform in just a few months.

The online magazine Daily NK reported, “In the North Pyongan Province area of Sinuiju, a kilogram of rice, which cost 400 Won at the end of last month, cost 800 Won on the 2nd, and 1000 Won on the 3rd. It is being said that the in the end, the price of rice will rise to pre-reform prices (of 2,500 Won per Kg).” The shortwave radio broadcaster Open Radio for North Korea reported similarly, stating, “North Korea’s rice prices, which were around 400 Won per kilogram at the end of February, shot up to 1000 Won on the 3rd of this month.”

More than anything, the reason North Korea’s rice price is doubling weekly is the plummeting value of its currency in relation to the PRC Yuan and U.S. dollar. In January, the (North) Korean Trade Bank set the official exchange rate for Yuan at 14.19 Won and for USD at 30 Won. However, according to Daily NK, the black market exchange rate for U.S. currency jumped from 1200 Won per USD at the end of February to 2100~2500 Won by March 3. Open Radio for North Korea reported that in Hyeryong, North Hamgyong Province, one Yuan traded from 80 Won on the black market February 25, jumped to 120~150 Won by the 28th, and traded for 270 Won at the beginning of March, tripling in just three days. It appears that the skyrocketing prices of food and goods in North Korean markets is directly related to North Korean authorities’ measures to control foreign currency, and Chinese Yuan, in particular.

Confidence in the value of North Korean currency has plummeted, and North Koreans are scrambling to grab up foreign capital as rumors circulate of further currency reform. Residents are trying to get their hands on Chinese Yuan, but North Korean authorities are working to prevent it due to concerns of Chinese dominance over the North’s economy. In order to block Chinese inroads into the North Korean economy, the government has banned the import of Chinese currency, and this is a major factor driving North Korean inflation today.

According to Yonhap:

North Korea brought in 13,834 tons of grain from the neighboring ally in January, a 3.6-fold increase from 3,869 tons in January last year, said Kwon Tae-jin, a senior researcher on the North’s agricultural sector at the South’s Korea Rural Economic Institute in a posting on his blog.

Rice accounted for about 61 percent or 8,425 tons of the North’s grain import from China, followed by corn with 3,448 tons, beans with 1,553 tons and wheat with 304 tons, Kwon said, citing data from the Korea International Trade Association.

“The big rise in imports of corn and beans, which the North didn’t bring in last year, appears to be not only because corn harvests were not good, but it also suggests the North increased imports over concerns about possible food shortages,” he said.

Kwon also said that the North’s regime could have increased imports to enlarge state food rations after last year’s currency reform caused strains on the country’s food supply system.

North Korea has relied on foreign handouts to feed its 24 million population after natural disasters and mismanagement devastated its economy. The situation worsened in recent years as South Korea halted regular food aid to the North after President Lee Myung-bak took office in early 2008 under a policy to link aid to Pyongyang’s process in ending its nuclear weapons programs.

… 

The U.N. food agency, Food and Agriculture Organization, said early this month that the North is expected to be short of about 1-1.2 million tons of food this year.

I think the data for this story came from this KITA web page, but I can’t be sure since my Korean is exceptionally limited. Here is a description of the KITA page in English.

On a personal note, I wish the major South Korean media outlets  would get into the habit of posting links to their sources.  It is not difficult to do this.  

Read the full article here:
N. Korea’s food imports from China more than triple in January: expert
Yonhap
3/12/2010

Daily NK
Yoo Gwan Hee
3/5/2010

North Korea’s “Land Reform Law” was signed into law on March 5th 1946, and for a while it offered North Korea a way to produce enough food to feed its people.

The following are the basic contents of the law as implemented by the North Korean Provisional People’s Committee, which was led by Kim Il Sung.

Those Japanese and Korean landlords who possessed more than 50,000 square meters of land were to have it expropriated and distributed to existing tenant farmers for free, whilst the existing tenant farming system was to be abolished. The basic principles of the law were land expropriation without compensation and land distribution for free to former peasant tenants. However, those owning more than 50,000 square meters of land but without tenant peasants were excluded.

In accordance with the provisions of Article 5 of the law, the Committee granted farmers ownership, stating, “All expropriated land is to be distributed to farmers for free.” However, post-distribution use of the land was restricted; Article 10 of the law prohibited using land as collateral in lending, the selling of land or subletting to tenants. As the law itself puts it, “The distributed land cannot be given over to tenant farming and/or used as collateral.”

At the time of the law’s enacting, Korea had been liberated from Japanese colonial rule, but around 58 percent of arable land was still owned by a minority of pro-Japanese landlords constituting just four percent of the population. Meanwhile, most North Koreans in 1946 were farmers, 80 percent of all farmers were extremely poor, and they represented a majority of the total North Korean population. Naturally, the new law was very popular. It was, after all, an opportunity for the Communist Party to appeal to the masses. The political situation was especially complex; a country divided between Soviet-occupied North and American-occupied South, political factions coalescing around different parties, and factions emerging within the Party itself.

In North Korea, the North Korean Provisional People’s Committee and the Communist Party led land reform by organizing 90,697 members into 11,500 farming committees in 1946. They also organized 210,000 farmers aged 18-35 into a semi-military organization, the so-called “self-defense forces,” who supported the projects of the farming committees. During three weeks of land reform, 98 percent of confiscated land was distributed to farmers; poor farmers suddenly became the landlord of up to 13,200 square meters of land. Thereafter, they tended to farm hard and gave their allegiance to the Party.

The farming committee members were instrumental in carrying out the land reform, mostly by aiding in distribution and record keeping. Committee members subsequently became Communist party members and supported the regime at the regional and local level. Consequently, the number of party members rose from 4,530 in December 1945, to 26,000 in April 1946 and 356,000 by June 1946. The success of the land reform consolidated the authority of the North Korean Provisional People’s Committee, and resulted in successful elections for the North Korean Provisional People’s Committee in February 1947 at the local level.

However, following the birth of the North Korean state, individual ownership of land was ended by another national project. The collective farming system, implemented over the course of 1954-1958, resulted in farmers becoming employees on collective farms. The pretext for the collective farming system was communal ownership under the socialist system, but in reality it was a way to realize state control. Article 5 of the Land Reform Law was abolished and the farmers’ dreams of personal and equitable land ownership were swept away in the name of socialist modernization.

Ultimately, the inefficiency and unjust nature of the collective farming system combined with other factors resulted in the March of Tribulation in the late 1990s and the continuing hardships of the average North Korean family today.

Nowadays, farmers tend to solve their food security problems not by working hard on the collective farms, but by farming their own fields around their houses or on steep mountainsides. Their private production is, of course, relatively greater than that of the collective farms.

The way to solve the food crisis is, of course, quite simple; return the land back to the farmers. The North Korean authorities know that private ownership of land is the best way in practice to solve the food problem, but they fear what this might mean for the regime’s viability.

Choson Ilbo
3/9/2010

North Korea has launched a massive campaign to persuade people into farming to make up for a shortage, giving them ideological indoctrination and offering large benefits, sources say.

Civic group North Korea Intellectuals Solidarity said the party held seminars at party chapters on Feb. 23 promising W10,000 in cash and 120 kg of food for households if they voluntarily move to farms.

The Workers’ Party recently distributed copies of a training manual for senior officials on fortifying rural bases. “To increase grain production the most important thing is to make up for a shortage in the rural workforce. This is why blue-collar workers and office workers in urban areas, senior officials in particular, should lead the vanguard in the campaign.” The regime is urging the wives of senior officials in the party and security agencies to set an example for others.

The regime is afraid of the possibility of mounting public discontent if it forces people to relocate at a time when they are seething in the wake of a disastrous currency reform. The regime is giving indoctrination classes to senior officials to move to rural areas and urging them to set an example, news media speculated.

But the group said such efforts would not be effective in persuading ordinary North Koreans to move to rural areas because living conditions there are very bad. “It’s very likely that the regime will end up forcibly relocating them,” it added.

Daily NK
Jin Hyuk Su
3/8/2010

Rice price inflation, a key indicator of the spiraling inflation which has beset the North Korean economy as a whole since the November, 2009 redenomination, shows no signs of slowing down, with the price in North Hamkyung Province reaching 1,500 won per kilo as of the 7th.

A source from North Hamkyung Province told The Daily NK the news by phone yesterday, saying, “In the Nammun jangmadang, in Hoiryeong, at around 2PM this afternoon, the rice price per kilogram was more than 1,500 won.”

He also reported, “I called a friend of mine who lives in the Songpyung-district of Chongjin, and he said that the rice price per kilogram in the Sabong jangmadang there had gone over 1,450 won.”

The source added, “Although the Hoiryeong food distribution situation is actually better than elsewhere because this is Kim Jong Suk’s home town, since the value of the new money is continuously deteriorating and the exchange rate has skyrocketed, the prices of all products, as well as rice, have continued to soar.”

The source also noted that promised food distribution had failed to materialize. According to his friend, when Kim Jong Il went to Kim Chaek Steel Mill in Chongjin on the 5th, he told them that food distribution would soon be released. But, that has yet to happen; “just words,” as the source put it.

He went on, “The value of the dollar is rising uncontrollably. Since the economy is in such a mess, the dollar’s value cannot stabilize, only fluctuate.”

“Residents in Hoiryeong and Chongjin expected that when Kim Jong Il came to their Province, maybe to the steel mills, food distribution would be released, but there have been no practical moves on that.”

Exchange rates have also been soaring erratically, the source reported; as of today one dollar is being traded for 1,750 won and one Yuan for 250 won.

With a kilo of rice now costing an unaffordable 1,500 won, residents are growing more and more incredulous, not to mention pessimistic, about the future; “Suicides are increasing,” the source asserted.

“Last year, elderly people committed suicide because they were pessimistic about their lives, but these days, more than a few young people are doing it too.”

According to Yonhap:

South Korea’s planned shipment of its first food aid to North Korea in years has hit a snag due to sourcing difficulties, an official said Saturday.

The South has been preparing to send 10,000 tons of corn to the impoverished neighbor since mid-January, right after Pyongyang accepted its aid offer made months earlier. The shipment would mark Seoul’s first food assistance to the North since President Lee Myung-bak took office in early 2008.

The government has since approved a 4 billion won (US$3.5 million) budget to fund the assistance and notified the North of a shipping route, based on a plan to buy corn in China and ship it directly to the North from there.

“Considering shipping costs, it would make the most sense to send Chinese corn” to the North, a government official said on customary condition of anonymity.

The official said, however, that the plan has faltered because of China’s “grain export quota,” which places restrictions on food exports in order to meet the country’s rising domestic demand.

The delay has raised concern that the planned aid may not be delivered by the time the North needs it the most — usually between March and May when food shortages in the country worsen — because it usually takes at least a month after the purchase is made for such to be delivered.

But the government official said that he believes the problem will be resolved soon, though he did not elaborate.

Read the full article here:
South Korea’s planned food aid for North Korea hits snag
Yonhap
3/6/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-3-4-1
3/4/2010

As the failure of North Korea’s currency reform drives the country’s food woes to even greater depths, DPRK authorities and farmers from around the country met on February 25 for two days of meetings under the theme, “Let’s Focus All Efforts on Farming and Resolve the Food Problem!”

It has been four years since North Korean authorities called for a nationwide meeting of agricultural workers, with the last meeting in February 2006. From 1974 to 1994, meetings were held annually in January or February, when farmers had a chance to rest between the fall harvest and the spring planting season. However, after the famine in 1995, in which millions starved to death, no meetings were held for twelve years.

This year’s New Year’s Joint Editorial called for North Koreans to revolutionize the light industrial and agricultural sectors in order to improve the lives of the people, and for them to struggle to resolve the country’s ‘eating issues’. However, in the aftermath of last December’s failed currency reform, the North’s food problems actually worsened to the point that people are starving to death. This led authorities to hold a nationwide agricultural meeting in order to show their determination to focus efforts on resolving food shortages and to encourage farmers and other residents to focus on agriculture.

According to the (North) Korean Central News Agency (KCNA), the meetings were attended by “[Cabinet Premier] Kim Young Il, [National Defense Commission Vice-Chairman] Ri Yong Mu, and [Supreme People’s Assembly Chairman] Choe Tae Bok, leading officials of ministries and national institutions, party and people’’s committees and agricultural guidance organs in provinces, cities and counties, officials of farm primary organizations, model farmers, scientists and technicians in the field of agriculture and officials of relevant industrial establishments.”

Vice-Premier Kwak Pom Gi presented a report, stressing, “On the agricultural front this year, marking the 65th anniversary of the founding of the Party, we must decisively ease the country’s food issue, [and] the people’s eating issue, charging forward with the improvement of the lives of the people and the construction of a strong and prosperous nation.” He also called for assistance to agricultural communities and related sectors, and for the prioritization of agricultural goods and materials.

According to a source in North Korea reporting to the South Korean organization Good Friends, deaths due to starvation in South Hamgyong Province’s Danchon city and South Pyongan Province’s Pyongsong city were reported to central Party authorities. This led to meetings on January 27 and February 1 of central Party members, cabinet officials and People’s Security authorities at which emergency measures to stave off famine were discussed.

Results of a survey of living conditions in Danchon and North Hamgyong Province’s Chongjin reported to central Party authorities revealed many deaths due to starvation, while currently, the most deaths due to lack of food appear to be occurring in South Pyongan Province’s Sunchon and Pyongsong cities. Last year, Party authorities in these cities turned over approximately 65 percent of harvests to the military, while farmers were only issued, on average, five months worth of rations.

According to Bernama (Malyasia):

Farmers in Pahang will soon be able to use North Korean technology to commercially grow paddy, after an alliance was formed between North Korea and Syarikat Sungai Duri Plantations Sdn Bhd.

Sungai Duri Plantations managing director Datuk Normala A. Kahar said the technology acquired from North Korea was used countries like China, Uganda, Angola and the Philippines successfully.

Normala said five experts from North Korea who would be involved in a project that covers an area of 263 hectares in Sungai Pelak, Pekan, would conduct a study and research to help soil enrichment and identify pest that can be a problem to the growth of paddy.

She added that an area of 60 hectares in Mambang, Pekan had already been planted with the MR219 type of seeds produced by Mardi and would be ready for harvest in May.

“The results have been very encouraging and we are optimistic that the project will be a success,” she told reporters after sealing an agreement with the North Korean government here on Thursday.

Normala said through the technology, farmers can reap up to seven tonnes of paddy per hectare a season.

Malaysia has an interesting relationship with the DPRK.  I have been told that Malaysia does not require entry visas for North Koreans.  If this is not true, please let me know.  There are also a couple of North Korean restaurants in Kuala Lumpur.  Finally, the Mansudae Overseas Projets Group built the Rice Museum (“Muzium Padi” located here) in northern Malaysia.

Pahang is here.

Institute for Far Eastern Studies
NK Brief No. 10-2-24-1
2/24/00

Suffering from severe food shortages, North Korean authorities ordered that markets be opened unconditionally, and that there be absolutely no crack-down on the sale of foodstuffs within the markets. This is according to a report issued on February 18 by the North Korean human rights organization ‘Good Friends’.

Good Friends’ newsletter revealed, “After examining a report on food shortages and the conditions of residents in each region throughout the country by the Office of Economic Policy Review, the Central Committee of the Korean Workers’ Party issued an ‘Order for Absolutely No Regulation Regarding Foodstuffs’ to each law enforcement office.” The order stated that until central distribution is running smoothly, all markets are to be reopened as they were prior to recent government crack-downs, and that under no circumstances were authorities to try to regulate food sales.

Furthermore, it reported that “the People’s Security Bureau also received the Central Committee’s order, and passed on a special instruction to each regional security office ordering agents not to crack down on markets for anything other than illegal goods, and not to regulate food sales, in particular.” Local authorities were also ordered not to engage in altercations with market traders and not to intervene or interfere in fights between traders working within the markets.

According to Good Friends, “Central Party authorities set the price of one kilogram of rice at 24~25 Won, corn at 9 Won/Kg, and corn noodles at 10 Won in an attempt to stabilize the daily lives of people, but the lack of central distribution made the attempt meaningless.”

A North Korean public health official relayed to Good Friends that a report released by central authorities on January 22 stated that there were more than 47 thousand cases of tuberculosis in the North, but that more than half were unable to receive treatment in a hospital, and that “the rise in the number of deaths due to starvation among the most indigent was due to TB patients being unable to eat and subsequently dying after catching a cold or the flu.”

In mid-January, Kim Jong Il called a meeting of Party administrative director (and brother-in-law) Jang Sung-taek and other high-level authorities in order to ease the side-effects of last year’s currency reform. A North Korean source relayed to Daily NK on February 17 that at the meeting, it had been decided that authorities would issue emergency rations to residents facing the threat of starvation.

According to this order, the Office of Food Procurement has been tasked with distribution of the emergency food; neighborhood units receive 5 kg of food daily, while offices receive between 5~15 kg, depending on the number of employees. Neighborhood unit directors or factory supervisors are responsible for assessing the food needs of their neighbors or employees, and prioritize food distribution to those households at risk of starvation.

Until the end of January, currency reform measures that banned the sale of food and drove prices up drove a significant number of households to starvation. However, since the emergency rations measure began to be enforced on February 1, there have been no reports of large-scale famine.

Daily NK
Jung Kwon Ho
2/22/2010

In late January, Kim Jong Il held a meeting of his highest officials, including Jang Sung Taek, Director of the Ministry of Administration of the Party, aiming to find ways to alleviate the negative side effects of November’s currency redenomination. In the meeting, the group apparently agreed to release emergency supplies of rice to those on the brink of starvation.

According to a Daily NK source, “Following the meeting, which he chaired, Kim Jong Il handed down a handwritten decree to the chief secretaries of all provinces on January 20 in which it was stated, ‘Preventing anyone from starving to death is your obligation.’”

Chief Secretaries of Provincial Committees of the Party, the recipients of the decree, handed on the threat to their subordinates, warning provincial cadres, “You will resign if anyone starves to death, because this was a direct instruction from the General.”

In the decree, the three most vulnerable provinces were named as Yangkang, South Hamkyung, and Kangwon Provinces, so the officials governing those provinces are understandably nervous. They are the provinces where most casualties occurred during the March of Tribulation, and they remain the most food insecure.

Under the decree, the Ministry of Procurement and Food Policy makes daily deliveries of 5kg of relief rice to each people’s unit and 5-15kg to each factory and enterprise. Chairpersons of people’s units and managers of factories are required to observe the circumstances of the people under their control and provide those in the greatest danger of starvation with relief rice first.

In late January, quite a number of households were reportedly facing starvation due to the aftermath of the currency redenomination; notably sky high prices coupled to strict market regulations. However, there have been no reports of starvation since relief rice deliveries began on February 1.

Alongside the chairpersons of People’s Units, cadres working for local government offices are required to cross-check whether or not starvation is occurring. In theory, they are reprimanded if they do not report the situation truthfully.

Upon hearing the news, a defector in Seoul commented, “It seems that the people will not lie still and suffer that dire situation. Kim Jong Il may have done this because he senses a crisis situation this time.”