North Korean Economy Watch

Daily NK reports that large-scale mobilization is underway in North Korea, for citizens to gather manure for agricultural use:

The North Korean authorities have launched a new “battle” to support the aims of Kim Jong Un’s New Year’s Address, and are moving to restrict residents from engaging in private business.

The country held a massive rally on January 4 at Kim Il Sung Square to garner support for the aims set out in the address. Another rally was held outside Pyongyang where Kim Jong Un pledged to continue North Korea’s economic development.

“The government decided that the first ‘battle’ of the New Year in support of Kim Jong Un’s address was to be held from January 4-10,” said a Ryanggang Province-based source on Sunday. “Orders for the battle were handed down on January 5 and mobilization began thereafter.”

The new battle focused on the annual drive to collect manure (including night soil) for biological fertilizer from farms in the country’s agricultural regions, while city residents focused on improving their collection rates. The “manure collection” in rural areas also involved organizations and people from the cities.

In an effort to ensure that an atmosphere of total mobilization was created, local police actively restricted freight trucks, vans and other vehicles transporting goods and people from driving on the streets during the course of the battle.

“The authorities threatened to send private business people violating the order to disciplinary labor centers (rodong dallyeondae),” a source in South Hamgyong Province reported.

Local provincial governments generally engage in “battles” at the beginning of each year in tandem with the annual New Year’s Address, but it’s unusual for the whole country to hold a battle for an entire week.

Full article:
North Korea’s population mobilized for manure collection
Kim Yoo Jin
Daily NK
2019-01-15

Benjamin Katzeff Silberstein

“The government decided that the first ‘battle’ of the New Year in support of Kim Jong Un’s address was to be held from January 4-10,” said a Ryanggang Province-based source on Sunday. “Orders for the battle were handed down on January 5 and mobilization began thereafter.”

The new battle focused on the annual drive to collect manure (including night soil) for biological fertilizer from farms in the country’s agricultural regions, while city residents focused on improving their collection rates. The “manure collection” in rural areas also involved organizations and people from the cities.

In an effort to ensure that an atmosphere of total mobilization was created, local police actively restricted freight trucks, vans and other vehicles transporting goods and people from driving on the streets during the course of the battle.

“The authorities threatened to send private business people violating the order to disciplinary labor centers (rodong dallyeondae),” a source in South Hamgyong Province reported.

Local provincial governments generally engage in “battles” at the beginning of each year in tandem with the annual New Year’s Address, but it’s unusual for the whole country to hold a battle for an entire week.

Full article:
North Korea’s population mobilized for manure collection
Kim Yoo Jin
Daily NK
2019-01-15

Benjamin Katzeff Silberstein

Daily NK:

The North Korean government and the nation’s farmers have long harbored issues over food supplies. The government’s aim is to increase the volume of rice that farmers sell while farmers try to retain as much food as they can. However, tensions had subsided until recently due to an overall increase in food production to around 5 million tons over the past four years.

Due to various factors, this year’s harvest has been lower than expected and food supplies for the military are consequently insufficient. This has led the authorities to mobilize government agencies like the Prosecutor’s’ Office to ensure that farmers are compelled to sell the required volume of produce to the government (at significantly below-market prices).

“Production fell due to floods and droughts last year, so government purchases of rice for the military didn’t happen on time. The authorities have turned to the state’s legal apparatus to force the farmers to fulfill the quotas they are required to sell to the government to make up for the shortfall,” a source in South Pyongan Province told Daily NK on January 7.

“Farm managers argue that they cannot sell the government any more rice due to the various taxes and farming costs they have to pay along with preparing seed grains, but the Prosecutor’s Office is demanding that the government receives the reserve supplies of food produced by the farms.”

Farmers who have received plots of farmland are required to provide 70% of their production to the military, and are facing harsh difficulties due to the government’s demands.

“Local prosecutors in Pukchang, Sukchon, Yangdok County and other places are visiting farms and even the homes of farmers to search for grains that have been hoarded in secret,” said a separate source in South Pyongan Province. “The prosecutors are telling farmers that if they are caught hiding grains, they’ll be tried in court and sent to correctional facilities.”

Full article:
State orders farmers to supply more food to the military
Kim Yoo Jin
Daily NK
2019-01-11

Benjamin Katzeff Silberstein

Daily NK reports:

North Korea has designated the week of December 17, the seventh anniversary of Kim Jong Il’s death, as a “week of mourning,” and will hold national events to commemorate the late leader’s death. In parallel to these events, the authorities have selected “model workers” from the country’s farms that have completed their yearly production and will feature them in an upcoming rally honoring “enthusiastic workers”, multiple sources in North Korea have reported.

[…]

The North Korean authorities have tended to announce such rallies only after the participants have arrived in Pyongyang and the rally is poised to begin.

That the rally is being held during the mourning period for Kim Jong Il is a rare turn of events, and the South Hamgyong Province-based source suggested that Kim Jong Un decided to avoid delaying the event due to the importance the regime places on agricultural production. North Korea suffered from an onslaught of natural disasters ranging from intense heat waves to typhoons this year, leading to a poor harvest.

“The production of food this year fell as international sanctions continued and Kim Jong Un may have felt like he was pressed for time,” Seo Jae Pyong, secretary-general of the Association of North Korean Defectors, told Daily NK.

Full article:
Rally honoring enthusiastic farm workers to be held after 19-year hiatus
Kim Yoo Jin
Daily NK
2018-12-17

By Benjamin Katzeff Silberstein

That’s what the FAO says in a recent estimate. Here’s the Yonhap summary of the FAO report:

I have my doubts about the accuracy of these estimates. It’s highly unclear how the Food and Agriculture Organization (FAO) has conducted any recent food production surveys in North Korea to generate these new figures. Even when they did  such surveys on a regular basis, conditions were difficult as they were (at least to my knowledge) not able to freely visit farms and markets. The role of the markets in agricultural distribution is still not fully or officially acknowledged by the North Korean government. I’ve emailed FAO with questions about the basis for these numbers, and will update the post if or when they respond.

The problem is that the marketization of food supply makes it very difficult to create an accurate balance sheet for food needs and production. We don’t know precisely how much private plots produce, for example, or how much is imported outside of what the government reports to FAO. Again, all of this would be much easier to understand if more information was readily available about the FAO’s methods for this estimate.

Here is the actual report by FAO. You can find previous reports here.

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.

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.

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.

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

Benjamin Katzeff Silberstein

This Daily NK article isn’t yet available in English, but here’s the gist of it: right now harvest season is in swing and North Korea, and with the (seemingly) continuously expanding household responsibility system (포전담당제), labor productivity is increasing, according to some sources, because farmers are able to keep 70 percent of their own production. We still don’t know precisely how widespread the system is, but given its very public recognition in North Korean media such as Rodong Sinmun and some journals, it would be reasonable to assume that local administrators have a green light to go ahead with it if they wish, if it isn’t already fully implemented throughout the country. Daily NK:

북한 일부 지역에서 ‘포전담당제’ 도입에 따라 농민들의 근로의욕이 높아지고 있는 것으로 전해졌다. 특히 최근에는 모피나 가죽 등 군부대 지원 목적의 세외부담도 줄어들면서 농사일에 더욱 열성적으로 뛰어들려는 모습이 나타나고 있다는 전언이다.

평안남도 소식통은 4일 데일리NK와의 통화에서 “이제는 개인 포전제가 실시돼 그만큼 농사에 자기 땀을 바친다”며 “식량 걷이를 하면 열 중에 셋(30%)만 국가에 바치고 나머지 일곱(70%)은 자기가 처분하는 식이라 농사하는 사람들 생활이 폈다”고 전했다.

소식통은 “포전제를 실시한다는 말은 몇 년 전부터 나왔는데 실제로 실시된 것은 작년부터”라며 “비료는 돈이 들어가지만 퇴비는 움직이면 얼마든지 모을 수 있으니 오히려 이제는 노동자보다 농사꾼들이 더 부지런해졌다”고 말했다.

실제로 최근 들어 농사일에 나서는 주민들이 인분이나 짐승의 배설물 등 퇴비를 모으러 여기저기로 부지런히 움직이고 있다는 게 소식통의 이야기다.

포전담당제는 지난 2012년 김정은 북한 국무위원장의 ‘새로운 경제관리체계를 확립할 데 대하여’라는 담화 발표를 계기로 본격 도입됐다. 기존의 분조(分組)를 가족 단위로 쪼개 소규모 인원이 포전(圃田, 일정한 면적의 경작용 논밭)을 운영토록 해 생산량의 일정 비율만 국가에 바치고 나머지는 개인이 처분할 수 있도록 일부 자율성을 부여한 제도다.

현재 이 같은 제도는 북한 전역으로 확대되는 추세지만 전면 실시 및 정착 여부에 대해서는 여전히 회의적인 시선도 존재한다. 특히 북한 당국은 포전담당제의 성과가 뚜렷하게 입증되고 있다고 선전한 바 있으나, 현재로서는 해당 제도가 북한의 농업생산량 확대에 기여하고 있다는 뚜렷한 근거를 찾아보기 어렵다.

Full article:
“北 일부지역 농민들, ‘포전담당제’ 실시에 근로의욕 상승” (Farmers in some areas say that labor productivity has increased, thanks to the household-responsibility system)
Ha Yoon-ah
Daily NK
2018-10-04