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March 2021: North Korea’s skyrocketing corn prices

Tuesday, March 9th, 2021

By: Benjamin Katzeff Silberstein

Given the self-imposed border lockdown North Korea is under at the moment, the recent rise in food prices should come as no surprise. The precise factors are difficult to pin down, but whatever they are, there is some serious cause for concern.

The main reason is the rapid rise in the price of corn as of late. One Daily NK-source in North Korea attributes it to large-scale state purchases of corn for snacks manufacturing in honor of Kim Jong-il’s birthday on February 16th.

The article makes clear, however, that this is only a partial explanation. Indeed, looking at the price index, it’s clear that the rise started long before February. On November 15th last year, the average price for a kilo of corn was 1350 won. On February 23rd this year, the average price was 3137 won. That’s a rise of 135 percent in a relatively short period of time. Prices of corn have often risen in the beginning part of the year, but not by this much.

Average corn prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

Looking at individual cities, the rise is even more staggering. In Hyesan, where food prices tend to be higher in general, corn prices rose from 1450 won/kilo on November 15th last year to 3620/kilo on February 23rd. That’s an increase of 150 percent in only a few months.

Corn prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

Why is this a concerning development for corn prices specifically?

First, corn is, in the North Korean context, rice’s less desired sibling. Corn always makes up a significant part of the diet for a big proportion of the North Korean population. However, when food becomes more scarce, people switch over a larger portion of their diets to corn, since it gives more food for the same amount of money. So a rise in corn prices may be a signal of growing scarcity overall.

Second, even if a large proportion of the rise was indeed caused by increasing state purchases, this is also a troubling indicator for the state of the North Korean market for food. If state procurement for snacks manufacturing for one single day can impact prices so much, this suggests a market under considerable stress and volatility to begin with.

At the same time, rice prices have remained conspicuously low and stabile. Rice prices in the last observation in the price index are around their seasonal normal. I’d be careful to assume too much based on this, however. Rice prices are lower right now than around the same time last year. This may – and I want to stress how little we know for certain – indicate that they are in fact lower not because supply is stabile, but because demand is lower. More consumers switching over their consumption to cheaper foods such as corn would put downward pressure on rice prices.

Average rice prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

The current situation will only be possible to fully evaluate in a few weeks when we have more data points available. Suffice to say for now that, with all the caveats about the trappings of data from North Korea, the situation looks concerning.

Update March 16th, 2021: DailyNK recently published more info about the corn price situation, reporting that prices have stabilized in much of the country. Still, 3,000 KWP/kg, reported in “other inland regions” (than Hyesan), is high. It’s more than double the average price reported in Daily NK’s price index around one year ago.

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The economy in the Central Committee Plenum (February 2021)

Tuesday, February 16th, 2021

By: Benjamin Katzeff Silberstein

During the recent (2nd) plenary meeting of the Korean Worker’s Party Central Committee, several remarks were made that focus on the economy. Most seemed to follow the statements during the Party Congress, both in tone and focus. Emphasizing the role of legal measures seems to be a way to regularize and formalize the orders set out at the congress. Legal supervision, after all, is something continuously ongoing, unlike rule by decree. It’s unclear what “irrational elements” means in the KCNA summary, but my sense is that it may be about semi-legal and highly dubious (from the state’s point of view) practices of essentially private entities partnering with and using the bureaucratic cover of state-owned companies for business purposes.

Here’s an excerpt of the KCNA coverage from the third day, with my emphasis added in bold:

The General Secretary in his report suggested important tasks for firmly ensuring the implementation of the national economic plan by law and channeling all Party works into the fulfillment of this year’s economic tasks.

The report stressed the importance to strengthen the legal supervision and control over the establishment and executive process of the national economic plan, the order of the Party and the law of the state.

It called upon the legislation sector to remove irrational elements becoming stumbling blocks to the implementation of the national economic plan and enact and perfect new laws for every sector which help promote the efficiency of the production and construction.

It said that legislative bodies including the prosecution organ should increase their role to make sure the national economic plan is properly distributed and correctly executed, and in particular, stage a strong legal struggle for checking all kinds of illegal practices revealed in economic activities, adding that all sectors and units should obey them unconditionally.

Analyzing that the faults revealed in the economic work in the last period are caused by the party organizations which failed to fulfill their responsibilities and role as organizers and standard-bearers in carrying out the Party’s policies, the report proposed tasks of the party organizations for intensifying the party guidance and political guidance from the standpoint of holding full responsibility for the result from the implementation of this year’s economic task.

It referred to the ways for the party organizations at all levels to positively play the role in properly steering the implementation of the national economic plan while giving priority to the organizational and political work for arousing the masses to the accomplishment of this year’s goal.

It also suggested tasks calling upon the party organizations of ministries and national institutions to properly grasp and guide the execution of Party’s economic policy by enhancing the level of the Party work in line with the characteristics of their units in charge of important portion in the overall work of the state and to strengthen the direction of the party life of public service personnel.

Concluding his report on the first agenda item made through three consecutive days, the General Secretary said that the plenary meeting was convened in the timely and necessary period in the sense that it helped rectify mistakes from the stage of planning this year’s work and newly decided on the great work for the people and also helped find out and correct the ideological maladies including passivism and self-protectionism latent in officials.

(Source: “Third-day Sitting of 2nd Plenary Meeting of 8th WPK Central Committee Held,” Korean Central News Agency February 11th, 2021.)

Here is an excerpt of the second-day coverage, again with emphasis added in bold. The bottom paragraph restates much of the language from congress a few weeks ago about increasing state control:

Saying that propping up agriculture is an important state affair that must be successful at any cost to solve the food problem for the people and successfully push ahead with the socialist construction, the General Secretary analyzed the achievements and experience gained in the agricultural field for the recent several years and set forth tasks of stably and steadily developing the agricultural production based on them.

Emphasized in the report were the issues of taking prompt state measures for supplying farming materials on which success or failure of farming for this year hinges for the present, pushing ahead with the work of providing a material and technical foundation for the agricultural production in a planned way and bringing about a decisive improvement in the Party work in the rural areas.

[…]

The General Secretary in the report evinced the militant tasks to be carried out by the People’s Army and the munitions industry this year for implementing the decisions set forth by the 8th Party Congress, and the direction of future action to be taken by the sector in charge of affairs with south Korea and the sector in charge of external affairs, before underscoring the need to thoroughly carry them out without fail.

The report noted that the success or failure in this year’s economic work depends on the capability and role of the state economic guidance organs in the main, and made clear the issue that the Cabinet and state economic guidance organs should restore the function peculiar to them as economic organizer and their controlling function to improve the guidance and management over the whole economy, the one of improving the role of non-permanent economic development committee and other important practical issues for consolidating the Cabinet-centered system, Cabinet-responsibility system.

(Source: “Second-day Sitting of 2nd Plenary Meeting of 8th WPK Central Committee Held,” Korean Central News Agency, February 10th, 2021.)

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Fertilizer factory shutdown and goods shortages

Monday, February 8th, 2021

Benjamin Katzeff Silberstein

KITA has a new briefing paper out about some developments relating to North Korea’s domestic economy and external trade. If true, the shutdown of the Namhung Youth Chemical Complex (청년화학연합기업소) is one of several examples of how the border shutdown due to Covid-19 is hurting basic industries through a shortage of spare parts. Goods such as cooking oil are also reportedly in short supply on the markets, and local government incomes from market stall fees are also reportedly dropping. As always with this sort of information, none of it is fully confirmed.

You can find the report here (in Korean), below is an excerpt from a summary by Nikkei:

The Namhung Youth Chemical Complex, north of Pyongyang, produces fertilizer and coal gas using anthracite mined in the area. North Korean leader Kim Jong Un visited the site in 2013.

High-pressure valves and jet sprays at the complex have become too worn for continued use, according to reports the Korea International Trade Association received from North Korea in January. Without replacement parts, it is unclear when the plant can resume work.

The suspension hinders North Korea’s push to lift its meager agricultural output. Kim last year ordered a boost in fertilizer production and attended a completion ceremony for a separate fertilizer plant. Coal gas also serves as a valuable industrial energy source for the country, which faces an oil embargo in response to its nuclear and missile testing.

[…]

The resulting shortages also have struck North Korea’s jangmadang informal markets, which have flourished under Kim’s tenure. At one market in the city of Pyongsong, the volume of available flour and cooking oil has halved. Many stalls that used to sell Chinese-made apparel and appliances have shut down as well.

The slowdown of the jangmadang is eating into the coffers of North Korea’s regional authorities. South Pyongan Province, home of the Namhung plant, made about half as much from overseeing these markets in the last quarter of 2020 as in the year-ago period, heavily impacting provincial spending, the KITA report says.

(Source: Yosuke Onchi, “Key North Korea factory shuts down from COVID-19 parts shortage,” Nikkei Asia, February 8th, 2021.)

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Asahi Shimbun: China provided North Korea with substantial amounts of food and fertilizer this year

Wednesday, November 4th, 2020

Benjamin Katzeff Silberstein

In a piece of news that should surprise no one, Asahi Shimbun reports that South Korean government sources say China provided North Korea with 5-600,000 tons of food aid and fertilizer this year. Although it wouldn’t entirely make up for the estimated shortfall, it is still a highly significant contribution:

But several South Korean government sources said China has provided North Korea with between 500,000 and 600,000 tons of food along with the fertilizer this year.

It also sent about 600,000 tons of corn and other types of grain between June and August, according to Chinese sources with inside knowledge of ties with North Korea.

Pyongyang requested more assistance in the aftermath of the summer typhoon damage and Beijing is considering sending an additional 200,000 tons of food, the sources said.

The South Korean sources focused on the volume of fertilizer shipped to North Korea as such assistance is considered highly unusual.

North Korean authorities equate one ton of fertilizer to 10 tons of food assistance, a former high-ranking North Korean government official said.

“Due to chronic shortages, fertilizer is highly prized in North Korea,” the official added. “The amount sent this year is equivalent to 5.5 million tons of food, which exceeds the yearly production of food. It was a very unusual level of assistance.”

Although North Korea is no longer in the grips of famine that raged in the late 1990s and claimed countless lives, the U.N. World Food Program has estimated that between 2018 and 2019 about 10 million North Koreans did not have enough to eat.

The situation is believed to be worse this year.

North Korea was plagued by flooding and other damage due to typhoons and torrential rain in summer after near-drought conditions in spring.

A source at a Chinese government-affiliated agency who is well-versed in issues involving North Korean agriculture said that the harvest estimate at planting time was between 3.5 million and 3.8 million tons for a shortfall of about 1.5 million tons.

Rice prices were kept stable through the release of grain stockpiled for emergencies, but the situation without China’s assistance was expected to be dire from next spring.

China’s decision to bail out its unpredictable neighbor may reflect a strategy to keep North Korea in its corner as Beijing’s confrontation with Washington worsens. In this regard, Beijing made a big fuss of its involvement in joining fighting in the Korean War on the 70th anniversary of China’s participation.

“China and North Korea have always shared interests in terms of their view of the United States, but that has strengthened recently,” said a North Korean source. “China is sending a message to the United States through its appeal of a honeymoon period with North Korea.”

With no signs of progress in denuclearization talks with the United States, the easing of economic sanctions against North Korea appears unlikely in the short term.

That suggests North Korea will continue to lean on China for support, analysts said.

“If North Korea receives support from abroad, it will no longer be able to say it is getting by with its own efforts,” said a South Korean expert on the North Korean economy. “But North Korea can continue to save face because China does not announce the assistance levels.”

(Article source: Takeshi Kamiya in Seoul and Yoshikazu Hirai in Shenyang, “China bailout to North Korea: massive food and fertilizer aid,” Asahi Shimbun, November 3rd, 2020.)

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North Korea’s disaster management: a comment about a comment

Wednesday, November 4th, 2020

By Benjamin Katzeff Silberstein

It might seem a strange topic to post about on the day after the US elections, but perhaps some readers might like a break from the incessant commentary for something completely different.

If so, I highly recommend the article that former ambassador James Hoare published yesterday on 38 North, partially as a comment to my earlier article about North Korean disaster management. Ambassador Hoare gives a highly interesting historical perspective partially based on his own experiences in the country, noting that deforestation is a problem on the Korean peninsula much older than North Korea itself. He also notes that North Korea is far from the only country where homes constructed near riverbeds are regularly flooded, and argues that North Korea’s flooding problems are, after all, not so unusual in an international context.

I fully agree with all of these points, and the historical context is very valuable and crucial for understanding the current situation. If anything, there are perhaps two points of minor disagreement that I have with Hoare’s text.

First, the current North Korean situation is in large part a result of changes that could have been avoided. Deforestation was acutely exacerbated during the Arduous March, because people had few other alternatives than to cut down trees for firewood and to clear the ground for farming. Deforestation and flooding, therefore, are not phenomena entirely endemic or “natural” neither to the Korean peninsula nor to North Korea in particular, because things were not always this way. There is nothing natural or inherently necessary about North Korea’s economic system, as the many former communist states who have adopted programs of systemic overhaul have shown. Natural disasters may be natural, but each state has a choice in how to meet them.

Second, ambassador Hoare rightly points out that one should perhaps applaud the progress being made rather than to note that improvements have a long way to go. My article neither sought to decry nor applaud any improvements, but simply to show where things stand, based partially on conversations with several people who have themselves worked in natural disaster mitigation in the country.

And despite the improvements that have been made, there is a real and substantive risks that North Korea’s disaster management improvement plans and ambitions will stop at being just that. In this realm, there should be little doubt that the government’s ambitions are high and praiseworthy. The problem is that we have seen too many examples of ambitions without implementation to conclude that they will in fact be realized. Oftentimes, the policy process, opaque as it is, often appears to stall, and political interest and attention may wane. In this, too, North Korea is not alone in the world.

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North Korea’s summer floods, 2020

Monday, August 17th, 2020

By: Benjamin Katzeff Silberstein

Flooding has been sweeping across North Korea for the past few weeks. As has been usual for the past few years, state media has been very forthcoming in reporting the damage. At least partially, one might suspect this forthrightness is directed to an international audience, not least in China, to signal that North Korea hopes for aid. (Quietly, of course, behind the scenes, because officially, the country doesn’t want it.)

First and foremost, however, the target audience is – as usual – domestic, and the state seeks to reassure the people that the leadership is always watching out for them. Here’s the Rodong coverage of Kim Jong-un’s trip to a flood-damaged area:

Kim Jong Un, chairman of the Workers’ Party of Korea, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the armed forces of the DPRK, inspected Taechong-ri Area of Unpha County, North Hwanghae Province hit by flood.

Due to several consecutive days of torrential rain and rainstorm recently caused by the seasonal rainy front, the waterway levee gave way in the area of Taechong-ri of Unpha County, leaving more than 730 single-floored houses and 600-odd hectares of rice field inundated and 179 blocks of dwelling houses destroyed.

After hearing the report on the situation of the Taechong-ri area of Unpha County where lots of dwelling houses and a large area of arable land were submerged, the Supreme Leader personally went to the spot to learn about the situation and clarified tasks and ways in detail for the recovery of the damaged area.

Saying that he was really relieved to learn that there was no casualty as all the residents of Unpha County were evacuated to the safe area in advance, he called on leading organs in the county including Party and power organs, working people’s organizations and public security organs to responsibly conduct the work of putting up the residents who lost their homes at offices including those at the Party committee and people’s committee of the county, public buildings and separate houses, to stabilize their living and comfort them.

He ordered the relevant field to submit a document on supplying every household in the afflicted area with the reserve food grain of the chairman of the State Affairs Commission.

It is of priority importance to quickly supply sleeping materials, daily commodities, medicines and other necessities to the flood-affected people to stabilize their living as early as possible, he said, entrusting this task entirely to the departments of the Party Central Committee and families of its officials.

He gave an order to organize the flood damage rehabilitation headquarters with cadres of the relevant departments of the Party Central Committee and the Ministry of the People’s Armed Forces, and instructed the headquarters to report to him after correctly calculating the materials and forces needed for the rehabilitation, while sizing up the flood damage on the spot for starters.

The central designing force should be sent to newly build 800 model houses in the farm village of Unpha County hit by the flood and the project be completed at an earliest date possible and on the highest level, he said.

Saying he decided to mobilize the people’s army for the rehabilitation again, he ordered the people’s army to form a necessary force and urgently deploy it and to give precedence to the arrangement of the wrecked houses, roads and the zones with the people of the county.

Stressing the importance to take measures to ensure materials such as cement necessary for the rehabilitation, he gave an instruction to use the strategic reserve supplies of the chairman of the State Affairs Commission to meet the calculated amount.

He appealed to the Cabinet, the State Planning Commission, ministries and national institutions to actively cooperate in the rehabilitation of the flood-hit Unpha County, well aware of the Party’s intention.

(Source: Political News Team, “Supreme Leader Kim Jong Un Inspects Flood-Damaged Area in North Hwanghae Province,” Rodong Sinmun, August 7th, 2020.) 

Indeed, damage has been quite bad, as Washington Post reports here, but it’s not clear as of yet how it will add up in comparison with previous years:

The International Federation of the Red Cross said the floods have left at least 22 people dead and four missing, citing the Democratic People’s Republic of Korea Red Cross and the country’s State Committee for Emergency and Disaster Management.

The disaster adds to a troubling humanitarian situation in North Korea, whose weak economy has been further battered by the coronavirus pandemic.

The official Korea Central News Agency (KCNA) said at least 16,680 houses and 630 public buildings have been destroyed or flooded during the monsoon, with nearly 100,000 acres of crops damaged and many roads, bridges and railway tracks broken. A dam at a power station also gave way, it said.

(Source: Simon Denyer, “North Korea floods kill 22, approach nuclear reactor — but Kim doesn’t want help,” Washington Post, August 14th, 2020.)

Daily NK cites internal documents claiming that over 40 percent of terraced corn fields in North Hamgyong have flooded away. They also report, unsurprisingly, that the county visited by Kim personally is getting a disproportionate amount of attention and help:

Monsoon rains and strong winds have led to substantial damage in the grain-producing regions of North Korea’s west coast, leading to predictions that the country will face a poor harvest this year, Daily NK has learned.

“North Hamgyong Province is the center of the country’s corn production, but an [internal] statistical report on Aug. 3 said that 42% of terraced cornfields and farmland near rivers had been either washed away or flooded,” a source in North Hamgyong Province told Daily NK on Monday. “The report did not include data about farms tilled by individual farmers. Including those farms would mean that the actual damage [to farmland] is even greater.”

Regarding the situation in nearby South Hamgyong Province, the source told Daily NK that “South Hamgyong Province is the home of rice [production], but midway through the monsoon season approximately 30% of farmland has already been flooded.”

According to the source, the harvest this year in the region was actually better than last year until the start of the monsoon season. He pointed out, however, that “rice plants became inundated with water just as they were being fertilized, so there is talk that farmers will barely be able to meet the government’s autumn quota for military rice [rice going to the military].”

Farms in the coastal areas of South Pyongan Province have also suffered from flooding and crop damage, a source in the region said.

“There has been substantial damage to crops, with monsoon rains flooding fields in several areas near the central west coast and strong winds blowing over corn plants that were just beginning to mature,” the source said. “Farmland stretching across thousands of jongbo in Jungsan and Pyongwon have been damaged by salt water, which means we can’t expect normal harvest levels this year.”

One jongbo is equivalent to around 9,917 square meters.

Areas near Nampo, including Onchon and Gangso, were hit by monsoon rains and strong gales that felled telephone poles and roadside trees, according to the source, who also reported that dozens of farm houses have collapsed and their now-homeless former occupants have been evacuated to other structures on farms, including cultural halls and rooms used by work units.

RAPID CLEAN UP EFFORTS IN UNPA COUNTY

After North Korean leader Kim Jong Un visited North Hamgyong Province’s Unpa County to see the devastation wrought by a dyke that burst open, efforts to cleanup the damage are rapidly underway, a source in the area told Daily NK.

“The Supreme Leader came to inspect [the damage] in Unpa County personally, and the province has dispatched a storm trooper contingent made up of 300 party members along with another storm trooper unit made up of around 500 Kimsungilist-Kimjongilist Youth League members,” the source said.

“The authorities have also mobilized workers from various businesses in the province while [Unpa County] farmers, along with village and district-level inminban [North Korea’s lowest administrative unit], are working to process barren soil, build embankments, restore farmland and repair people’s homes,” he added.

People who have lost their homes in the area have been housed in cultural halls, guest houses, local inns or the houses of friends; however, county authorities have forced many to engage in the cleanup efforts, according to the source.

The military has mobilized soldiers to the area, including 280 soldiers selected from units under the “August 15 Training Center” along with two battalions from the 25th Brigade under Bureau 7 (a military engineers unit). The battalions have reportedly brought along mechanized equipment for the cleanup efforts. The soldiers have set up waterproof tents and are living in the area while cleaning up the damage.

On Aug. 7, Rodong Sinmun and other state-run media reported that Kim Jong Un visited Unpa County and ordered the construction of a new farming village to accommodate 800 families, as well as the release of grain reserves and emergency supplies for victims and those performing relief work.

The source confirmed that the authorities had ordered the completion of housing blocks accommodating two families each by Nov. 10.

“Military units along with the storm trooper units made up of provincial party members and members of the Youth League will build the houses,” the source said. “Overall responsibility for the project is held by both the Cabinet’s vice premier and the North Hwanghae Province Party Committee Director, and progress reports will be sent to the Supreme Leader.”

AN UNPA COUNTY-FOCUSED RELIEF EFFORT

North Korea is also holding a nationwide campaign to raise funds for the relief work and the construction of new houses in Unpa County, according to the source.

“Even though the damage [by the monsoon rains] is not limited to Unpa County, inminban around the country have been told that they must offer assistance to the area by sending support packages for affected residents and soldiers engaged in construction work by Aug. 13,” the source told Daily NK.

While the required contribution differs by region, the figure is believed to be KPW 20,000 for each household in Pyongyang’s Mangyongdae District and KPW 10,000 or 2.5 kilograms of rice for each family in Kaechon, South Pyongan Province. Families in Sariwon, North Hwanghae Province, have been told to either contribute KPW 15,000 per household or provide labor in lieu of a monetary payment.

On Monday, Korea Central News Agency and other state-run media reported that vehicles carrying the reserve grain sent by Kim Jong Un had arrived in Unpa County. The article was accompanied by photos of residents welcoming the delivery.

“This [kind of delivery] happened once before during the General [Kim Jong Il]’s reign, but people were deeply moved because it is the first time they have been provided with such a gift under Kim Jong Un,” the source said, adding, “Those in other regions are envious.”

(Source: Ha Yoon Ah, “N. Korea moves to cleanup monsoon damage across grain-producing regions,” Daily NK, August 12th, 2020.)

Resources for relief efforts are scarce. As Radio Free Asia reports here (in Korean), enterprises as well as private citizens are being ordered to contribute.

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What explains North Korea’s puzzling price stability?

Friday, July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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The North Korean economy is doing badly, but keep some perspective

Tuesday, June 23rd, 2020

By: Benjamin Katzeff Silberstein

Sanctions and Covid-19 have fused together to put the North Korean economy in what can only reasonably be described as an awful situation. Trade first plummeted through sanctions, and then even further because of North Korea’s and China’s anti-Covid19 measures. And the fall continues, as these figures in Hankyoreh show:

Figures from the Korea International Trade Association (KITA) and Chinese customs authorities reviewed on June 18 show a major drop in the value of North Korean goods being exported to the Chinese market: US$10.7 million in January and February (-71.7% year on year), US$600,000 in March (-96.2%), and US$2.2 million in April (-90%). The value of North Korean exports to China, which stood at US$2.63 billion in 2016, has fallen since economic sanctions were toughened, decreasing to US$1.65 billion (-37.3%) in 2017 and US$195 million in 2018 (-88.2%). Exports rebounded in 2019, to US$285 million, but that was still less than a tenth of the value of exports in 2016.

But how bad are things?

Bloomberg ran an article yesterday with the angle that the North Korean economy is the “worst” in two decades, and that this is why the country is lashing out against South Korea with renewed vigor. To support the former claim, it cites figures claiming that the country’s economy will contract by a total of 6 percent this year due to the combination of sanctions and Covid-19.

But how reasonable is this take?

There is no doubting that things are bad, but some context is badly needed. One of course cannot equate an economic contraction with the overall situation. (Never mind that any number on this will be qualified guesswork at best.) A contraction is only the economy shrinking, and it means nothing if we don’t know what the starting point is. In 1997, North Korea was perhaps at the height of a devastating famine, after the economy crumbled following the collapse of the Soviet Union, and China vastly scaling back support.

Today, North Korea may be in an economic crisis of sorts. But it entered it on the back of several years of steadily increasing exports to China. These exports, in fact, grew by more than a factor of ten between 1998 and the record year of 2013. So the situation is so different that a comparison is hardly meaningful.

This is also true for the food situation. According to numbers from the World Food Program and the Food and Agriculture Organization, whose data is questionable but highly valuable, food production stood at 3.3 million tonnes in 2008, not an unusually low figure for the time. Contrast this with the projection that this year’s harvest will be 4.6 million tonnes. Not great, lower than it should be, lower than a few years ago, yes. But still not nearly the level of the disaster years.

Also, it is crucial to remember that even in ordinary times, a not insignificant proportion of trade with China occurs off the books. Throw an increasingly lower Chinese sense of caring what the US thinks about its sanctions implementation into the mix and you’ve got, well, likely a lot more trade happening under the radar. This is what news reports from inside North Korea have been saying for quite a while.

Not that things aren’t bad, or that North Korea’s recent actions have to do with sanctions (they almost certainly do). But don’t forget about context or proportions.

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Why Kim Jong-un “came back” at a fertilizer factory

Wednesday, May 6th, 2020

By: Benjamin Katzeff Silberstein

The choice of a fertilizer factory inspection as the place for Kim Jong-un to “return” after his three-week absence was no coincidence. On May 2nd, Rodong Sinmun reported that Kim had toured and cut the tape at the Sunchon Fertilizer Factory. To do this in the month of May especially is highly symbolic, and we should understand it as a signal that Kim and the state are very serious about alleviating North Korea’s perpetually difficult food situation.

Sure, in the budget report at the Supreme People’s Assembly in the middle of last month, the claim was repeated of a bumper harvest last year. This claim is extremely unlikely to be true, as the numbers show, but should not be read literally in any case. Indeed, given North Korea’s economic situation, the food situation is remarkably stable, although always difficult. But still, these two claims aren’t necessarily inherently contradictory. Kim can claim a bumper harvest while also working to stabilize the food situation over the long run. Fertilizer has long been an achilles’ heel for North Korean agriculture, and historically the country has been highly dependent on chemical fertilizer. One of the main catalysts for the famine in the 1990s was the Soviet Union and China cutting of oil subsidies. North Korea’s ability to produce such fertilizers, whose production process is very energy-intensive, subsequently collapsed. The Rodong article announcing Kim’s “return”, unsurprisingly, highlights the completion of the fertilizer factory as a victory for North Korea’s independence and self-reliance.

This focus on fertilizers is not unique in North Korean media. Just the other day, on May 5th, an article in Rodong lauded the factory construction as a crucial step for North Korea to remain independent and reject “reform and opening”. Another the same day covered a new organic fertilizer factory in Sinyang County. Articles about fertilizer factories – particularly organic ones – have been highly prolific, especially since around 2016. That focus also isn’t new. The extensive use of chemical fertilizer damaged North Korea’s soil badly, and Kim Jong-il once gave an entire speech wholly focused on the supremacy of organic fertilizers.

Just like the focus on fertilizers, it’s no coincidence that it happens in May. This month marks the beginning of the main planting season in North Korea. The food security situation is already concerning, not least with the country’s coronavirus prevention measures keeping crucial shipments of agricultural inputs such as seeds reportedly backed up and waiting to enter the country. China has previously provided crucial fertilizer aid to North Korea (in addition to grain shipments), and perhaps still does so. But with China highly concerned about keeping re-infections out, as well as watching out for its own stability first and foremost, it may be more reluctant than it otherwise would to provide aid to North Korea to make up for a difficult harvest, should it be necessary.

Moreover, a significant question mark remains around North Korea’s fertilizer production efforts. Oil is still a central input for fertilizer manufacturing, as well as for irrigation efforts. How does North Korea intend to operate and power factories such as the one Kim visited in the long run? Regardless of what factories it builds, resources scarcity will continue to be a significant stumbling block for now.*

 

*(For some reading related to this issue, see the recent debate between Hazel Smith and James Kelly at PacNet.)

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Fertilizer shortages in North Korea due to border lockdown

Wednesday, April 1st, 2020

Benjamin Katzeff Silberstein

Reports Daily NK:

North Korea’s farms in the country’s breadbasket are suffering from a lack of fertilizer and other agricultural supplies amid the shutdown of the Sino-North Korean border, Daily NK sources have reported.

“Farms are lacking agricultural supplies throughout the province even as we are heading into the planting season,” a North Hwanghae Province-based source reported on Mar. 31.

North Korean farms typically focus on preparing for the year’s farming during January to March, acquiring needed fertilizer, pesticides and other supplies.

The country’s agricultural sector, however, relies on imports of agricultural supplies and typically trading companies are putting on all their efforts into acquiring supplies during this period.

With the closure of the Sino-North Korean border and a general halt in trade and smuggling across the border, however, farms are not getting the supplies they need this year.

“North Korean authorities are telling farms to figure out things themselves, even telling them to make their own electricity,” the source said. “Farmers are upset.”

North Korean officials have moved to increase supplies of fertilizer to farms by ordering fertilizer factories throughout the country to increase their production beyond this year’s original production quotas.

“Factory managers are full of anxiety because they have to create massive amounts of fertilizer – more than they are accustomed to,” the source noted.

North Korean cities and counties typically have their own fertilizer factories. Most of these factories, however, are small-scale and are unable to produce enough to supply all the farms in their respective areas.

(Source: Ha Yoon Ah, “N. Korea’s farms face shortages of fertilizer and other supplies,” Daily NK, April 1st, 2020.)

More than immediate rice prices rising, this sort of news is perhaps the most concerning in the long run, and we’ll only begin to see the effects in a few months.

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