North Korean Economy Watch

38 North
Randall Ireson
2012-2-8

READ THE FULL ARTICLE HERE

Despite continuing food shortages in the DPRK, the 2012 New Year’s Joint Editorial and other statements related to the succession of Kim Jong Un suggest there will be no new approaches to revitalizing North Korean agriculture. The editorial labeled the food problem “a burning issue in building a thriving country,” but allocated fewer than 150 words (of 5500) to that issue, only exhorting the masses to increase yields, implement crop rotations, and increase production of farm machinery and farm inputs.

Yet agriculture could lead a revival of the DPRK economy if appropriate policy changes were implemented. The technical means of improving farm production in the DPRK have been known for years. And if farms could use income earned from increased production to purchase improved machinery and other supplies needed for modern agriculture, a virtuous circle of investment in the farms plus support to small industry could lead to the modernization of both sectors. Government investment combined with some international assistance could stimulate sustainable increases in productivity and better incomes for workers on the farms and in related industries.

A few recent projects point the way to a sustainable and highly productive agricultural sector. But without changes in the institutions and infrastructure that support agriculture, there is no hope for any substantial improvement in food security. The leadership succession offers an opportunity to continue and augment some necessary changes begun under Kim Jong Il, though not if consolidation of the new leadership is founded on a reflexive insistence on ideological orthodoxy.

Fifteen years of international aid programs to the agriculture sector have brought a very good understanding of the difficulties faced by DPRK farms as well as the means to overcome them. There are no technical obstacles to greatly increased farm productivity. Nothing exceptional is required-only the widespread application of commonplace good farming practices. A few examples will suffice:

*applying lime to the fields to offset acid soils would increase yields by 20-40%;
*rotating cereal crops (especially maize and wheat) with legumes such as soy or green manure crops would increase yields by around 10%;
*using better seeding equipment would increase yields by around 10% because of better germination and appropriate spacing between each plant;
*using the methods of SRI (system of rice intensification) in paddy fields can increase rice yields by over 20% with no other inputs; and
*conservation agriculture (low tillage farming) would reduce soil erosion, save fuel, and improve soil quality.

These practices are neither difficult nor complex, and many farms in the DPRK already know of and are beginning to adopt these methods. Yet most of these practices are still isolated exceptions because despite their clear benefit, farms lack the support infrastructure and economic resources to implement them fully. The DPRK has largely completed its demographic transition from a rural to an urban society, thus surplus rural labor is not available to offset the loss of industrial support to agriculture. Farms need machinery and fuel as well as the other inputs of modern farming. Use of lime depends on fuel to haul the crushed limestone from quarries. Lack of tractor power makes land preparation slow and difficult, thus impeding the use of off-season green manures or of double cropping. Farms mostly do not have modern seeders for maize, soybean, or wheat. Seed placement by hand is neither uniform nor at a regular depth, causing crowded plants and uneven germination. Use of SRI is impeded by the lack of inexpensive plastic trays that ease handling of the very young rice seedlings…

READ THE FULL ARTICLE HERE

According ot the Donga Ilbo:

About 10,000 tons of fruit have been exported every year to North Korea via the Chinese city of Dandong in Liaoning Province, which borders the North at the estuary of the Yalu River.

Fruit imports for the North`s elite have reportedly posted double-digit growth over the past five years despite severe food shortages in the Stalinist country.

An informed source in Dandong said Monday, “About 10,000 tons of fruit were exported to North Korea via Dandong Marine Center last year,” adding, “They were worth 100 million yuan (16 million dollars).”

Shipments to North Korea have grown about 15 percent per year on average over the past five years, the source said.

Fruits exported to the North include the different varieties available in China, including subtropical and tropical types such as bananas, pineapples, litchis, dragon fruit and durians as well as apples, tangerines and watermelons.

The source said fruit exports surge just before major North Korean holidays, including Feb. 16 (the birthday of the late North Korean leader Kim Jong Il) and April 15 (the birthday of North Korea founder Kim Il Sung).

“Fruit exports significantly increased ahead of Christmas Day in the past, but there was no notable change in exports last year due to the death of Kim Jong Il,“ the source said.

North Korea does not celebrate Christmas but fruit exports usually increased because Dec. 24 marks the birthday of Kim Jong Il’s biological mother Kim Jong Suk. The shipments are sent to Pyongyang for use at events or consumed by the power elite. Payment is made mostly with U.S. dollars, but the yuan is often used to settle accounts.

The Dandong city government also established an agency in charge of fruit exports to the North. Liaoning Province announced on its website Thursday that a center for market purchase of exported fruits for border area trading was set up in Dandong.

The purpose of the market is for Dandong to supply fruit to meet growing demand in North Korea, and assure the quality and safety of them.

Furthermore, the agency aims to manage chaotic fruit export markets for North Korea. In Dandong, a number of fruit stores targeting trade with the North rather than sale to residents are reportedly operating.

One fruit vendor said, “We`re shipping fruit via vehicles that regularly travel back and forth to and from Shinuiju and Dandong.”

The center is designed to control and manage the overall fruit export market to the North, including fruit exports by such small merchants. From now on, all fruit exports to North Korea will be reportedly be sent through this center.

The center is a subsidiary of Dandong Guopin Co. Ltd., a state-run company established by Dandong. It has a system worth 10 million yuan (16.4 million dollars) designed to enhance capacity in sorting, refrigeration, packaging, inspection and transport of fruits.

The center has taken charge of about half of fruit shipments from Dandong to North Korea every year, and its office is in Dandung Marine Center.

Read the full story here:
Chinese city exports $16 mln worth of fruit to N.Korea yearly
Donga Ilbo
2012-2-6

According to the Daily NK:

The North Korean authorities since the beginning of this year have accelerated securing fertilizers under the slogan ‘agriculture focused line’. There have been orders ‘to keep good exporting of feces activities’ by the North Korean authorities to various regions of the Rural Management Committees of the People’s Unit.

The inside source which viewed this information told the Daily NK on the 26th, “There have been orders to proactively collect farm manure to export by mobilizing personnels to actively participate in this movement”.

The source said, “In conjunction with the farm fertilizer project there have been reports to send used agricultural tools to the farms to help production”, continued, “Apply pressure to reach 700 million tons of grain crops to successfully achieving the preparation for farming.”

North Korea annually following the New Year’s accomplishment address has secured goods and engaged in these fertilizer movements to increase agricultural production. This has been called the first battle of the New Year. The main objective every year was for the people to secure farm equipment, plastics and procuring half ton of feces per person.

And therefore there are competitions among the people to secure feces. The feces amount each person have to secure for agricultural support is limited, people are waiting around in their neighbor home’s bathrooms to secure these fertilizers.

North Korea’s manure checks are very strict. Organized by the city, the members weigh the manure that is collected and give to each resident a confirmed certificate that they did what they were told to do so.

A North Korean defector explained, “North Korea expects 500kg of manure per person” continued, “because there is not enough for everyone generally 200-300kg of feces are created mixed with Nittan found at mountains in a ratio of 1:3.”

The Sources said, “Because Comrade Kim Jong Eun has particular interest in agriculture production, there is an atmosphere to prompt enforcement”, “And because of this agriculture production might increase and some are also hoping that maybe food problems will become better this year”.

Read the full story here:
Movements to Secure Fertilizer
Daily NK
Choi Cheong Ho
2012-01-28

Pictured Above: The DPRK’s two most famous waterways are the Paekma-Cholsan Waterway (see here and here) and the Kaechon-Lake Thaesong Waterway. A third waterway in the Miru Plain is too recent to appear on Google Earth.

 According to KCNA (2012-1-26):

Waterway to Be Built in South Hwanghae Province, DPRK

Pyongyang, January 26 (KCNA) — A gravity-fed waterway will be built in South Hwanghae Province.

It is another gigantic nature-remaking project in the era of Songun as part of the far-sighted nature-harnessing plan of leader Kim Jong Il and the dear respected Kim Jong Un.

The completion of the waterway will help sufficiently irrigate tens of thousands of hectares of farmland and tideland-turned rice fields including those in Ongjin, Kangryong, Pyoksong and other several counties to ensure a safe and high yield of grain.

It will also help save tens of thousands of kilowatt of electricity and make a great contribution to the economic development and improvement of people’s living standard by preventing the damage by flood in the area along Jaeryong River.

A ground-breaking ceremony took place in Haeju City on Thursday.

Present there were Choe Yong Rim, Kim Ki Nam and other senior officials and officials of ministries and national institutions, builders and working people.

As the DPRK’s “rice bowl”, South Hwanghae Province is home to at least three additional large-scale agricultural projects at the moment: Pujiman Tideland Reclamation (Ongjin), Ryongmae Island (룡매도) land reclamation project, and the Sohae-ri-Nunggum Island Tedeland Reclamation.

Pictured above (Google Earth) is Changsong Town in North Pyongan Province. This town is the home of the Changsong Joint Conference which was held in August 1962.  This meeting was referenced in the DPRK’s most recent Cabinet plenary meeting on the DPRK economy.

According to KCNA (2012-1-22):

An enlarged Cabinet plenary meeting was held.

Present there were Premier Choe Yong Rim and cabinet members.

Attending the meeting as observers were senior officials of the organizations under direct control of the Cabinet, directors of management bureaus, chairpersons of provincial, city and county people’s committees, chairpersons of provincial rural economy committees, chairpersons of provincial planning committees, directors of provincial foodstuff and daily necessities management bureaus and managers of major factories and enterprises.

Prior to the meeting, the participants paid silent tribute to the memory of leader Kim Jong Il.

The meeting reviewed the fulfillment of last year’s national economic plan and discussed how to implement the decision of the Political Bureau of the Central Committee of the Workers’ Party of Korea, joint calls of the WPK Central Committee and the Central Military Commission and the militant task put forward in the joint New Year editorial.

Vice-Premier Ro Tu Chol made a report to be followed by speeches.

The enlarged meeting set it as a priority task for this year to direct efforts into developing light industry and agriculture to improve the people’s livelihood and successfully carrying out the WPK’s prosperity-oriented strategy in the pilot domains and basic industries of the national economy upholding the flames of South Hamgyong Province. It also indicated the tasks and ways for it.

Also discussed was an issue of raising higher the flames of great innovation of South Hamgyong Province in the light industrial and agricultural fields.

The meeting mentioned the need to produce quality consumer goods favored by the people in the field of light industry and effect a decisive turn in development of local industry this year marking the 50th anniversary of the historic Changsong joint conference.

It also stressed the need for ministries and national institutions to help Changsong County in its industrial development.

Also discussed at the meeting were such issues as fulfilling the assignments for grain production for 2012 both in lowland and mountainous areas, making the best use of modern stockbreeding and poultry bases and large fruit and fish farms as well as the tasks for ministries and national institutions to preferentially supply materials, equipment and electricity to farming processes.

The meeting drew attention to the tasks for the industrial fields of electric power, coal, metal, railways and machine and construction and building materials, etc.

The meeting tabled the tasks for all ministries, national institutions and provincial people’s committees to lay their own scientific and technological foundations for stepping up the work for turning the economy into one based on technology in a forward-looking manner as required by the industrial revolution in the new century.

It also discussed the tasks for the fields of education, literature and art, public health, sports, capital construction, land management and urban management.

The meeting stressed the need for all economic officials to preserve the socialist principle and ensure profitability in economic management, operate and manage the economic work on the basis of detailed calculation and science as well as the need for ministries, national institutions and industrial establishments to set up strict order regarding planning, financial dealings and administration.

Relevant decisions were made at the meeting.

As premier of the Cabinet Choe Yong-rim has made quite a few prominent appearances in the DPRK media in the last two years which highlight his official efforts to improve the North Korean economy. His most recent public appearance (January 12) is reported to have been at the Jenam Coal Mine.

Kim Jong-un, however, is not a member of the Cabinet, so he did not attend the meeting. To date his legitimacy is being established through his relationship to Kim Jong-il/Kim Il-sung and as a leader of the KPA—rather than as a leader in the government or even the party (at least so far).

As a result, Kim Jong-un’s guidance visits have consisted almost exclusively of visits to KPA units.  In this month alone, he has visited the 105 Tank Brigade, KPA Unit 169, KPA Unit 3870, KPA Unit 354, KPA Unit 671, and the KPA soldiers constructing the Pyongyang Folk Village on the outskirts of Pyongyang. Uriminzokkiri has also credited him with spearheading the DPRK’s nuclear tests.

UPDATE: Here is Yonhap coverage of the meeting.

“Changsong Joint Conference”
The KCNA article prompted me to look into the “Changsong Joint Conference”, a term that did not ring a bell. The most recent reference I can find to it is this blurb from a March 2011 article in Korea Magazine:

The Changsong Joint Conference of Local Party and Economic Officials was held in August 1962.

The conference marked the beginning of developing the local industry throughout the country.

In recent years the county has made strenuous efforts to carry out the plan of the Workers’ Party of Korea for the building of a thriving nation and achieved many successes.

Hundreds of hectares of forests of raw materials and timber forests including pine-nut, wild-walnut and larch forests have been newly created.

The Changsong Foodstuff Factory gathers in scores of kinds of wild fruits including acorns, wild grapes, fruits of Actinidia arguta and Crataegus pinnatifida every year in mountains.

Recently its officials and workers have modernized all production processes including wild fruit drinks and wines as required in the IT age to produce foodstuffs in time.

Wines made from the fermented juice of wild grapes, fruits of Actinidia arguta and other wild fruits, Crataegus pinnatifida, Rubus crataegifolius, carbonated Actinidia arguta and other fruit juices, dried bracken and sliced bracken and other wild vegetables preserved in soy sauce are in great demand for their peculiar flavour.

The Changsong Textile Mill which started operation with six housewives has been turned into a modern fabric producer. As a treasure mill, it makes a great contribution to the improvement of the people’s standard of living. It produces quality fabrics, woolen knitted goods and quilts and blankets with local raw materials.

The Changsong Paper Mill produces paper from ground pulp. It has streamlined the equipment to improve the qualities of goods.

Looking round the local-industry factories in Changsong County in November last year, Kim Jong Il kindled the flame of developing the local industry throughout the country after the model of Changsong.

Changsong County stands at the head of development of local industry. Now its people work harder to change further the looks of their home village.

Another blogger seems to have located a single page of a book on the Changsong Joint Conference. Fortunately, he typed out the introduction:

The great leader Comrade Kim Il Sung had made a farsighted plan for bridging the gap between town and country and between regions and raising equally the living standards of all the working people. For this Changsong County had been taken as a model.

The great leader who had long pushed preparations for rapid improvement in the livelihood of the mountain peasants, studied deeply the state of affairs in this part of the country, and through his several on-the-spot guidances, paved the shortest cut to establish a socialist paradise.

In August 1962, in order to spread the example of Changsong across the land he convened the historic Changsong Joint Conference of Local Party and Economic Functionaries. There he put forward a new policy and overall ways and means to enhance the role of the county and develop local industry and agriculture, so as to improve radically the people’s living conditions.

In 1974, our people erected in Changsong the historic monument to the on-the-spot guidance of the respected and beloved leader Comrade Kim Il Sung, out of their wish to retell throughout generations the profound care of the fatherly leader who had shown the bright future of mountain villages and transformed that area into a people’s paradise fine to live in.

Kim Jong-il last visited Changsong in November 2010 where he visited the Changsong Foodstuff Factory, Changsong Textile Mill, and Changsong House of Culture. The first two locations are the shining examples of the success of the Changsong Joint Conference.  The Changsong House of Culture is where the meeting was officially held in 1962.

But if the goal of the conference is to reduce the disparity in the DPRK’s living standards, Changsong is probably not the best place to start. Changsong is home to one of the North Korean leadership’s most well-known luxury retreats.  This is because it was was extensively photographed by Kenji Fujimoto while he was working as Kim Jong-il’s personal chef.   See a satellite image and Mr. Fujimoto’s pictures of the compound here. You can see the Taegwan leadership train station Kim used to visit the compound here.

Pictured above (Yonhap): Food aid to be delivered to the DPRK (2012-1-27)

According to Yonhap:

Representatives of a South Korean charity group plan to visit North Korea next week to deliver 180 tons of flour aid to North Korea to help ease its chronic food shortages, officials said Friday.

The planned shipment by the Seoul-based Korea Peace Foundation marks the first flour assistance to the communist country following the death last month of North Korean leader Kim Jong-il.

The UNDP also made public that it will place a priority on the DPRK this year:

Radio Free Asia says the United Nations Development Programme will place a priority on improving food security in North Korea by reducing crop losses after harvests.

The U.S. based broadcaster said the UNDP plans to save more crops and improve seed production by revamping North Korea’s crop storage facilities and farm equipment such as threshers and grinders.

Around 15 percent of crops harvested in Pyeongyang are said to be damaged every year, while only 13 percent of the 150-thousand tons of seed produced meet international standards.

Food security is achieved by securing a certain amount of food, taking into account potential population increases, natural disasters and war.

Additional Notes:
1. I believe the “Korea Peace Foundation” is also the “Korean Conference of Religion and Peace (KCRP)”

2. Read about South Korea’s aid to the DPRK in 2011 here.

3. CNN also covered the story about South Korean food aid.

Read the full Yonhap article here:
S. Korean group to send first flour aid to N. Korea after Kim’s death
Yonhap
2012-1-20

According to the Daily NK:

There has been an upswing in prices and exchange rates in North Korea as East Asia moves towards the lunar New Year’s holiday, which falls on the 23rd.

A source from Hyesan in Yangkang Province told Daily NK this afternoon, “The number of people in the jangmadang is rising and trade is getting more active, and so the Yuan exchange rate and rice price are both on the up.” According to the source, the Yuan is trading for 680 North Korean Won, while rice is hovering at approximately 4,300.

A source from Musan in North Hamkyung Province previously reported similar circumstances to Daily NK on the 16th, with the Yuan at 780 Won and rice and corn at 4,500 Won and 800 Won respectively in the jangmadang there.

The current situation follows on from a price spike before Kim Jong Il’s death on December 17th [see here and here], the following mourning period (to the 29th) and criticism sessions (to January 8th). However, while at its height last month the price of the most expensive rice had hit 5,000 Won, by January 11th-14th it had declined to 3,000-3,500 Won in eastern regions. Now, however, with the holiday period ahead, prices are rising again.

“Although the self-criticism period ended, we still had to keep an eye on the security forces so the number of sellers in the jangmadang was what it used to be, but from a few days ago people started using the jangmadang as normal and the rice and Yuan prices started rising a bit,” the Hyesan source explained.

Interestingly, while the authorities have tried a number of measures to regulate the Sino-North Korean border and limit the use of foreign currency of late, sources report that the measures have only had a minor effect on prices and have not daunted the will of local people to trade at all.

Overseas currency is even being traded publicly somewhat more frequently now, sources report, showing the skepticism with which the people view official threats to stop the use of Yuan and U.S. Dollars in the market.

As the Musan source commented wryly, “People are saying that ‘If his dad couldn’t stop it, what is the young one going to do about it?’ and ‘As long as the Tumen River keeps flowing, they can’t stop the Yuan, the smuggling, or the defection.’”

Read the full story here:
New Year Seeing Active Trade
Daily NK
Lee Seok Young
2012-1-18

According to KBS:

The Voice of America reported on Wednesday that the World Food Program said North Korean authorities distributed 375 grams of food to every citizen in December.

A spokesman for the WFP quoted a North Korean government report saying that 200 grams of food were rationed per head in July through September. But it went on to explain that the amount increased to 355 grams in October, 365 grams in November and 375 grams in December.

The North Korean government cited the fall harvest as a reason for the increased food distribution. According to the WFP, the North Korean government aims to raise rations to 380 grams per head.

The WFP distributed 35-thousand-200 tons of food to three-point-one million North Korean people in December last year.

Read the full story here:

N. Korea Increases Citizens’ Food Rations
KBS
2012-01-05

The Financial Times indirectly brings up the impact of a basic economic lesson, the tragedy of the commons, in a recent story on the DPRK’s fisheries. According to the article:

Supply disruptions are a fact of life in doing business with North Korea. “They are always stopping work for different reasons, for the anniversaries of leaders’ birthdays or whatever,” said Sha Zhibiao, manager of a fish shop in Yanji, the biggest Chinese city near the north-eastern tip of North Korea.

The main transit point for the crabs is Hunchun, a bustling Chinese border town that is a few hours from the North Korean port of Rajin.

While the North Koreans queue for meagre state hand-outs of grain, the Chinese traders in Rajin eat at Chinese-run restaurants or cook for themselves with supplies they bring in.

Doing business with North Koreans is fraught with uncertainty, according to Lu Zhentie, Mr Gao’s partner. “We agree on a price and then at the last second if they find someone who will pay more they cancel the entire deal. We cannot trust them.”

Mr Lu said the North Korean fishermen operate individually – a sliver of private-sector enterprise in the state-run economy – and their crabs are sold in a grey market that local officials allow to exist. “We give them sometimes Rmb10,000 ($1,580) for a catch. Some have become rich, but I have no idea what they do with their money. Even those who are rich still wear clothes like this,” Mr Lu said, pointing at a tear in his trousers.

All three said that Chinese demand for North Korean crabs had boomed in recent years – and that the North Koreans were flirting with trouble in trying to satisfy it. Mr Lu pointed to small crabs in his tanks, saying that the North Koreans should have thrown these back into the sea to sustain their fishery. “If they keep taking all these out, I don’t know how much longer their resource will last,” Mr Lu said.

Although the bulk of the article deals with challenges to the DPRK business environment that result from a poor institutional environment  (unannounced policy changes and unenforceable contracts) towards the end of the article another important idea is indirectly introduced: The tragedy of the commons. The tragedy of the commons occurs when multiple individuals, acting independently and rationally, will ultimately deplete a common-pool resource, even when everyone knows that it is not in anyone’s long-term interest for this to happen.

In the past, over-fishing was probably not a problem in the DPRK as all activity was coordinated through the Ministry of Fisheries. If anything, incentives in the socialist economic system probably resulted in fishing at levels below the sustainability threshold.  Today, however, de-facto independent fishermen are able (and encouraged) to over-fish the DPRK’s waters so they can export their catch to earn hard currency. Over-fishing is probably not an outcome that anybody wants, however, in the absence of a credibly enforced fishing quota or private property rights in fisheries, rational individual fishermen (who are competing with each other) will be financially rewarded for catching more and increasingly smaller fish and crabs, because if they do not, the next guy (a competitor) will.

Read the full story here:
Crabs offer lifeline for North’s economy
Financial Times
2011-12-23

According to the Daily NK:

The overbearing presence of ‘grain patrols’ is being keenly felt in North Korea these days. Formed at the municipal level from People’s Safety Ministry agents and Worker and Peasant Red Guards from factories and other enterprises, these groups of 20-30 individuals are busy manning checkpoints on main transit routes in agricultural areas to thoroughly restrict the movement of grains from cooperative farms and private plots.

To transit grain legally in North Korea at this time of year, a permit must be sought from the relevent Rural Management Committees. Those who do not hold the required documentation are meant to face punishment, although many simply bribe their way out of trouble. The patrols, which arrive in August, usually disband at the end of November.

A Hwanghae Province source recently told one Daily NK reporter, “They are blocking roads day and night inspecting people and their carts. They do not allow the carrying of any kind of foodstuff and confiscate without condition the goods of those caught.”

The source added, “Even people mobilized for the fall harvest are getting body searched; they are really annoyed.”

Another source from Pyongyang also described the scene, saying, “Currently the grain patrols are focusing on regulating the movement of corn, and are carefully watching for harvested corn being taken into people’s homes. So, some people get together to rent a car and bribe the patrol to be able to get around.”

The source also agreed that a substantial number of market traders are bribing guards and taking this year’s rice and corn from farms to sell.

Read the full story here:
Return of the Grain Patrol
Daily NK
Lee Seok Young
2011-11-15