North Korean Economy Watch

According ot the Daily NK:

Since the North Korean security forces have been on special alert for the last two weeks in advance of the Delegates’ Conference, there has been a contraction in market activity, and this is forcing up rice prices.

In September, when farmers normally start harvesting, rice prices tend to drop, but because regular citizens do not know when the Delegates’ Conference is going to start, things are not easy this year.

A source from North Hamkyung Province told The Daily NK yesterday, “In Hoiryeong Market, rice was 1,000 won per kilo in late August, but today it is 1,300 won. The reason is that the special alert has been in force for around two weeks in the run up to the Delegates’ Conference, so there is less food trading going on.”

During any “special alert,” which the authorities impose in preparation for important political events, controls over migration and so-called “anti-socialist” activities are reinforced on pretexts of national security and rooting out espionage agents. The selling of rice is one thing which is subject to control.

Meanwhile, the most desirable corn is currently worth 750 won per kilo, according to source. This is corn produced last year; newly harvested corn costs 500 won. People tend to prefer old corn to this year’s corn because when they put it in water to cook, its volume increases more.

The source also explained that the people know exactly who to blame, saying, “People are complaining that last spring the authorities irritated them in order to wage war against South Chosun, and now they are being bothered with the Delegates’ Conference, which is still on hold.”

“Due to a crackdown on ‘grasshopper traders’ around markets, only traders who can afford a stall within the market can do business,” he went on. “It is natural for rice prices to rise because there are fewer rice sellers.”

Grasshopper trader means one who does business in alley markets, moving location in order to avoid the authorities.

The source noted, “In late October or early November, food prices may stabilize, but I am not sure because flood damage was so serious this year.”

With rising rice prices, exchange rates also rose; in Hoiryeong, one Yuan is now worth 235 won, which is 10% more than in late August.

See Andrei Lankov’s comments on the delay in the party conference here.

Read the full story here:
Conference Security Hitting Cost of Rice
Daily NK
Yoo Gwan Hee
9/14/2010

The video was originally released by the Choson Ilbo, but the Telegraph (Britain) has posted a high-quality version of it:

Click image to link to video

According to the Telegraph:

The video, obtained by Chosun Ilbo media agency, shows people [in Sinuiju] living in tents on streets with their water damaged belongings. Others can be seen buying water from a salesman.

The price of water has increased since the floods, according to the agency’s source, with a bowl costing 6 pence. The usual monthly wages are around £1.30.

Heavy rains in July and August have hit food production that, even in a good year, falls a million tonnes short of the amount needed to feed North Korea’s 23 million people.

According to the Chosun Ilbo, North Koreans in Shinuiju were complaining about the government and their inability to help the area properly.

Last week the South Korean government offered to provide £5.5m in emergency aid, including food, relief materials and first aid kits – but not rice nor construction equipment, as per Pyongyang’s request.

North Korea’s request was made through the Red Cross at the weekend, and is being reviewed, the Unification Ministry said in a statement.

South Korea has been reluctant to give rice to the North because it is worried it will not reach the people who need it most.

Pictures of the flooding can be found here.

Read the full story here:
Rare footage from inside North Korea reveals aftermath of floods
Telegraph
9/7/2010

According to the Daily NK:

North Korea is a “Tax-free country,” according to one of its many propaganda slogans, but this is contradicted by defector testimony, which suggests that residents carry a very heavy burden. According to defectors leaving the country after the North’s currency redenomination, North Korean people pay at least 20 to 30 percent of their monthly living expenses in the form of quasi-taxes to the state.

Since the redenomination, the minimum cost of living for a family of four has been in the vicinity of 50,000 to 60,000 won: around 35,000 for food and some 10,000 for other day-to-day necessities.

Next, North Korean residents pay at least 15,000 won for electricity and other utilities to the state.

Water and sewage and electricity cost, in total, around 1,000 won. Additionally, people have to give 30 percent of the earnings from their private fields every year. For a private field of around 40 pyeong (approximately 132m²), which is the general area for a single household, the farmer of the land has to pay around 3,000 won on average per month in usage fees, according to defectors.

In addition, if one adds other kinds of funding such as that for various kinds of local construction, military aid, fees for child education etc, the sum easily surpasses 10,000 won.

One defector, who arrived from Onsung in North Hamkyung Province in July of this year, said, “An elementary school in Onsung is instructing students to collect 10kg of apricot stones. If they cannot do that, the school forces them to give 5,000 won in cash. There are many cases of students who are unable to provide the apricot stones quitting school since they do not want to suffer under the burden.”

Another defector, who escaped from Hoiryeong in December last year, said, “Kim Ki Song First Middle School students had to pay 30,000 won every each three months for a school beautification project. However, many workers’ children were not able to tolerate that situation and quit.”

Another, who arrived in June from Hoiryeong, explained, “Even though the people were having to get food for themselves because of the absence of food distribution, the authorities took dogs, rabbits, leather or scrap from us all the time and, in addition, for the construction of a road, they pushed us to provide them with cement and bricks, so we had to offer all our income for several days.”

Besides all of this, the around 30 percent of people who do not have their own house have to pay at least 30,000 won in monthly rent.

Then, those who do businesses in the jangmadang have to pay between 300 and 2,000 won for each stall per day.

A defector, who did business in Chongjin until she defected in July last year, said, “The Provincial Committee of the Party took 300 won from each stall every day, and used 60,000 won of that for official expenses, gas for cars and entertainment for other cadres.”

Defectors say that the reason why the number of vagrants, so called kotjebi, has been increasing is also that they cannot afford to pay those fees.

Needless to say, while general people are weighed down by this heavy burden, high cadres in the Party, military or foreign currency earning bodies accumulate property through corruption, privilege, access to foreign currency earning businesses and the like, and enjoy their luxurious lives in high-class apartments in Pyongyang.

One defector who escaped from Pyongyang in February this year explained, “Since the currency redenomination, the preference for products rather than cash has been striking, so the price of apartments has risen a lot. In 2007, an apartment by the Daedong River was around $60,000, but now it is around $80,000 or $90,000.”

“While running errands, I visited one such apartment where high officials lived several times. It was amazing. They had foreign TVs, refrigerators and many other appliances. They used Korean or Japanese cosmetics and their shoes were all designer.”

A diplomat from the U.K. who visited Pyongyang in April, recently told the media that when he dropped by a fast food restaurant in Pyongyang most of the guests were students and some of them were wearing blue jeans and carrying cell phones.

The defector from Pyongyang criticized, “Newly built pizza or fast food restaurants in Pyongyang are like a playground for high officials’ children,” and concluded, “General local people are now struggling to feed this privileged class.”

The Daily NK conducted the interviews with defectors in this article with people who had just passed through the education course at Hanawon (the South Korean resettlement education center for North Korean defectors).

Read the full story here:
Tax Free North Korea Exists Only on Banners
Daily NK
Shin Joo Hyun
9/2/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-08-06-1
8/6/2010

Over the last five months, regular food rations have not been provided even to those in the capital city of Pyongyang, indicating the severity of food shortages in North Korea. According to the ROK Ministry of Unification, rice and corn were added to the list of goods with controlled prices in at least one market in Pyongyang. A list of controlled goods with state-set upper price limits has been distributed to each market throughout North Korea since 2003. While prices may vary slightly, comparing them with earlier price caps gives a good indication of the availability of goods.

The July appearance of rice and corn on the list of restricted goods, neither of which has been on the list even as far back as February, when strict market controls were enacted in the aftermath of failed currency reform measures, indicates that the ration system is not operating normally, even in Pyongyang. It also means that not only are officials not receiving normal rations, but that average residents are relying more on markets for their food. One Unification Ministry official stated, “Rice was on the list of controlled goods in markets outside of Pyongyang in February, but couldn’t be found in markets in the capital city…in July, rice and corn emerged [as items with price caps] in Pyongyang markets.” The official also explained that as the food ration system collapsed even in Pyongyang, the issuance of price caps on rice and corn was an indication that more people were turning to the markets to buy these staples.

Looking at other goods on the list, it appears that agricultural goods cost 3~7 times more in July than in February, and manufactured goods were as much as 7 times more expensive. Necessary goods, both agricultural and manufactured, have grown considerably more expensive in North Korea over just five months. More specifically, beans were up 3.6-fold; chicken, 3.3-fold; lettuce, 3-fold; apples, 6.3-fold; rice and corn, 2-fold. Ball-point pens and other daily-use items were up 5~6-fold. In July, rice sold for 550 won per kilogram, while corn was priced at 280 won per kilo.

The price caps are upper limits set by North Korean authorities, but the reality is that goods are often sold at higher prices. The shortage of agricultural goods, and the fact that the Chinese Yuan has appreciated 3-fold since February, has led to these record price-hikes. On May 26, Workers’ Party of Korea (WPK) authorities issued a decree, “Regarding Korea’s Current Food Situation,” calling for residents to fend for themselves. As prices skyrocketed on agricultural goods, one measure adopted by North Korean authorities has been to more than double exports of iron ore from Musan, North Hamgyong Province to China, while drastically increasing the import of corn. This increased import of corn has brought down the price of rice from 1,200 to 900 won per kilogram in Musan, while corn itself has fallen from 600 to 500 won. On the other hand, the drop in the foreign currency exchange rate in mid-July caused a shortage of dollars, driving the price of rice up to as high as 1,200 won per kilogram in some regions.

According to the Daily NK:

North Korean authorities released a public announcement that they will exchange deposits, consigned to the Chosun (North Korea) Central Bank during the currency redenomination in November last year, into new bills at the rate of 100:1 within the limit of 500,000 won.

Last November the North’s authorities announced that they will exchange the existing denomination, to a limit of 150,000 won per household, to the newly issued bills at the rate of 100:1. They urged people to deposit their remaining cash into the bank.

However, many citizens have refused to follow the instructions after previous experiences with forfeited deposits during the country’s fourth redenomination in 1992.

This measure is designed to work towards curing the hardships of residents caused by the decline in value of individual property since the last redenomination. There are hopes that it will stimulate market activity by increasing the amount of money in circulation, particularly since a downturn in purchasing power amongst the people led to an economic depression.

However, even after the Central Bank’s announcement the people remain apathetic. A source said that, “Prices have risen to similar levels as before the redenomination. Rice now costs over 1,000 won per kilogram; when you get back your deposit of 5,000 won you can only buy five kilograms of rice. It’s meaningless.”

If the state-designated price of rice, around 24 won per kilogram in procurement stores, had been maintained then this measure would be significant. Now the prices have multiplied by 50 and the people say that the measure is nothing but a play on words.

In addition, February saw the authorities hand down a decree to raise all state-designated prices by 100 times to levels known before the redenomination. The decree was not applied to people’s deposits in the bank, a fact that has received criticism from the public. A source commented that, “The authorities actions are nonsense. They raised prices by 100 times but people’s deposits were the same value as last year. It is ridiculous.”

Read the full sotry here:
Bank Deposits Can Be Withdrawn at 100:1 Rate
Daily NK
Park In Ho
7/29/2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-07-19-4
7/19/2010

Market prices in North Korea, which had been falling since March, have again begun to grow since the second week of July. This year’s prices have not followed the trends normally seen in the North; usually, prices fluctuate around the April~May lean crop season. According to a Daily NK source within North Korea, rice cost 450-500 won/Kg at the Hyeryeong Market, in North Hamgyeong Province, up until the end of June. However, prices had shot up to 750 won/Kg by July 13. Corn had also risen to more than 400 won/Kg. Along with the rise in prices, the exchange rate for won-to-yuan rose to 150:1, indicating that the value of the North Korean won had plummeted to a very low level.

Since the mid-2000s, as market economics expanded in the North, food prices tended to shoot up during the lean season of April~May every year. After potato and barley harvests in late June, prices again rise until September, when food prices tend to drop in anticipation of fall grain harvests. Because of this trend, most market traders spend November and December concentrating on buying up food stocks, and they then actively sell their food stores after April. Government authorities have also been known to stockpile food at the end of a year in order to resell after April at considerably higher prices. This regular fluctuation of prices also leads most North Koreans to stockpile all the food they can in December and January.

However, with the currency reform efforts enacted last November 30, North Korea’s food prices set off on a very different trend. Because the North Korean authorities closed markets after last year’s currency reform, January rice prices soared to sixty times as much as before the reform measure. Markets were allowed to reopen after February 5, but food prices remained unstable through mid-March. As the food stockpiling that North Koreans needed to do in December was delayed until March, spring sales were driven more by demand than by supply.

At the beginning of April, Pyongyang authorized the distribution of a small amount of food. Residents of the capital city received enough corn to get through May and June, and these rations, along with rumors of food imports following Kim Jong Il’s trip to China, helped stabilize prices. However, this stability faltered after less than two months. Anticipated Chinese food imports never materialized, and authorities discussed food shortages. In May, North Ham Province party officials released an order titled ‘Each unit is to resolve the food problems in the latter half of the year’. The lack of food and confidence circulating even at government levels again undermined market stability.

A continually soaring exchange rate also drove up prices. The won-to-yuan rate had climbed to 110:1 by June, and in late July has risen to 150:1. North Korean prices rise with the exchange rate, so without food price stabilization measures from the government, food costs will likely continue to grow.

Traders in Hyesan, Yanggang Province have more freedom to trade than most in North Korea, and are permitted to cross over into China once every two weeks in order to purchase goods to sell in North Korean markets. However, prices in the region continue to grow as demand cannot be met, due in part to the rising exchange rate that makes it increasingly expensive to import Chinese goods.

In the aftermath of the currency reform, North Korean authorities have released some food originally slated for military use and enacted measures to force down prices in an attempt to sooth the public. But, these attempts provided only temporary stability, and cracks are again appearing under the weight of rising exchange rates.

North Korea is planning to hold the first meeting of Party leaders in 44 years, and the state media has been emphasizing the economic successes of Kim Jong Eun in order to shore up support for him. Despite the press, however, average citizens in the North only see rising prices. Recently, due to the harvest season, Hyesan markets have been open only between 3:00 and 7:00 in the afternoon. Despite the limited hours, when doors open there is no apparent crackdown on prices or on the use of foreign currency, and markets are operating freely. However, since increasing numbers of North Koreans find themselves broke after the currency reform, sales are still slow.

The North’s economic situation is likely to get worse. Flooding during the July-August rainy season could have a detrimental impact of fall harvests. Farms already suffered from frosts in the spring, raising expectations that this year’s harvests will be lean. If fall harvests are light, concerns over food could grow, further destabilizing the food markets. Food prices are expected to continue to rise, and if this inflation impacts other goods, as well, disturbances such as those seen in January are likely to occur.

According to the Daily NK:

The price of rice has exceeded 1,000 won in border areas of North Korea, according to sources.

A source from North Hamkyung Province reported to The Daily NK on Sunday that the rice price had reached 1,050 won in Hoiryeong, 1,000 won in Hyesan and 950 won in Shinuiju.

Another source from Hoiryeong reported on Monday morning, “Rice prices have been going up since July, and they continue to rise steeply. Once rice prices go up, other prices follow suit. It is worrisome.”

The pace of the rises is dramatic. On the 1st of this month, the price hit 500 won, on around the 11th, 750 won, and on the 18th, 1,000 won. In just two weeks, then, it has doubled. If it keeps rising at this speed, it will rise to more than 1,200 won, a price which was also recorded in February this year.

Indeed, one South Korean NGO, People for Successful Corean Reunification (PSCORE), said today that the rice price in Musan, North Hamkyung Province has already hit 1,200 won.

Sources unanimously agree that the cause of the rises is the rising value of the Chinese Yuan.

The North Hamkyung Province source said, “In one week, one Yuan grew to be worth 220 won (from 150 won). That is exactly double the value of the won late last month.” It is also exactly the same rate of increase as rice is experiencing.

The source predicted that, “In short order, one Yuan may be worth 300 won.”

“People are suffering from increasing food prices. Even corn is now 500 won (per kilogram),” he added.

Even though the authorities hope to trumpet economic achievements in the September Delegates’ Conference in order to publicize Kim Jong Eun’s succession, it seems that complaints against the third generation succession as well as rising food prices are increasing.

Sources are watching with keen interest whether the authorities are planning to try and ameliorate the skyrocketing prices.

Read the full story below:
Rice Prices Break Through 1,000 Won
Daily NK
Yoo Gwan Hee
7/19/2010

According to the Daily NK:

As previously reported, the price of rice in North Korea, which declined in March, has started soaring again. But this rice price fluctuation looks different from those of previous years.

According to a source from North Hamkyung Province, rice in Hoiryeong market was between 450 and 500 won per kilogram until late June, but on July 13th it hit 750 won. Corn rice is also more than 400 won now.

At the same time, one Yuan is now worth 150 won.

Since the mid-2000s when the market economy started to spread, rice prices have risen during the spring poverty season in April and May. And then, in around late June, when potatoes and barley are harvested, prices stabilize, and then, in September, they decline in expectation of the harvest.

Therefore, traders in the jangmadang generally buy rice and other grains in November and December and then sell them in the jangmadang during April. Cadres also use that regular cycle of food price rises and falls to profit by buying rice late in the year and releasing it for a higher prices during the next spring. Therefore, poorer people also try to get rice and grain in winter time.

However, since the currency redenomination, the fluctuations have changed.

Immediately after the redenomination, the authorities released a measure shutting down the markets, so in January rice prices rose by around 60 times compared with before the redenomination. The markets have been open once again since February 5th, but food prices remained unstable through mid-March. That was because people did not buy grains until March, at which time demand promptly far outstripped supply.

In April this year, there was a limited amount of food distribution and some residents in some districts of Pyongyang received corn, which they were supposed to receive in May and June, in advance. Additionally, as a result of Kim Jong Il’s visit to China, rumor had it that a large amount of food would be delivered, so rice prices were relatively flat.

However, when the rumor turned out to be empty, a decree was handed down to lower units in May ordering food self-reliance at the local level. This only intensified anxiety about the food situation.

More serious problems may come in July and August, monsoon season. If the weather affects farming, anxiety about food for the last half of the year will grow. Make things worse, there was cold-weather damage to farming early this year, so a lost harvest is clearly going to be on people’s minds.

On this, one source said, “Food wholesalers predict that prices will go on rising until the harvest in August. And when rising food prices influence general products, big troubles can come, like they did in January of this year.”

 

Click image to see Hoeryong market prices.

Read the full story here:
Food Price Cycle Twisting in the Wind
Daily NK
Yoo Gwan Hee
7/13/2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-07-08-2
7-8-2010

As inter-Korean commerce has all but dried up in the wake of the Cheonan incident, trade between North Korea and China appears to have continued to grow. According to Chinese customs statistics released on July 6, trade with North Korea from January to May amounted to 983.63 million USD; 18.1 percent more than the 833.07 million USD reported for the same period last year.

North Korea imported 727.192 million USD-worth of Chinese goods (29 percent increase over the same period last year), but exports dropped by 4.9 percent, amounting to only 256.438 million USD. This indicates a 60 percent increase in North Korea’s trade deficit with China, which was 470.757 million USD in the first part of 2009. With South Korean sanctions against the North halting all inter-Korean trade outside of the Kaesong Industrial Complex following the sinking of the Cheonan, it is expected that Pyongyang will become even more economically dependent on Beijing.

During this period, crude oil accounted for most of North Korea’s imports from China, as Pyongyang bought 254,000 tons (slightly more than the 247,000 tons in early 2009). However, due to rising international fuel prices, this oil cost the North 157.097 million USD, a 76 percent increase over what Pyongyang spent during this period last year.

In addition, rice (24,400 tons), corn (31,400 tons), beans (20,500 tons), flour (34,000 tons) and other necessary food imports totaling 11,300 tons reflected a 41 percent increase over the same period in 2009. The cost of fertilizer imports also jumped sharply, amounting to 81,943 tons, or 115.6 percent more than the 38,004 tons imported from January to May 2009. Increasing imports of food and fertilizer are a result of the growing agricultural difficulties being faced in the North. Based on current prices, aviation fuel imports also grew by 46.8 percent, freight trucks by 98.7 percent, automobile fuel by 47.4 percent, and bituminous coal by 137 percent.

The top ten official imports of Chinese goods by North Korea were as follows: crude oil (21.6 percent); aviation fuel (3.1 percent); freight trucks (2.9 percent); automobile fuel (2 percent); bituminous coal (1.9 percent); fertilizer (1.8 percent); beans (1.6 percent); flour (1.6 percent); rice (1.5 percent); and corn (1.1 percent).

North Korea’s exports to China were mainly underground natural resources. The top ten exported goods were: iron ore (17.1 percent); anthracite (16 percent); pig iron (9.6 percent); zinc (5 percent); Magnesite (3.6 percent); lead (2.4 percent); silicon (2.3 percent); men’s clothing (2.2 percent); frozen squid (2.1 percent); and aluminum (1.9 percent).

According to the Daily NK:

Food price in North Korea at the end of spring held steady against food prices in March, and worries about an impending famine proved unfounded.

The Daily NK has looked at market food prices in Pyongyang, Shinuiju, and Chongjin over the first week of July. Everywhere, rice cost about 500 won while corn cost about 400 won. Compared to food prices in March, during the period when food is traditionally in the shortest supply, rice prices were much the same, whereas corn prices had risen by 50 percent.

A source inside North Korea explained, “Since the redenomination, some people have dropped from ‘middle income’ to ‘poor.’ As a result, demand for corn has increased, and that is the reason why corn prices have gone up. Some people still eat rice; however, many of those who used to eat rice are now feeding their families on corn.”

“Because of the planting battle, market hours were made shorter, but the market is running smoothly and food prices are stabilizing.”

However, the source conceded that the food security of senior citizens with no family support and homeless children seems to be very bad. The source said some of these people are indeed dying of malnutrition and disease, though not outright starvation.

So, while the food supply situation in North Korea is not in unusually poor shape, it seems that the aftereffects of last year’s redenomination are still taking effect,

Corn prices have increased by almost 100 won on average in the last month, and flour prices have also increased by about 200 won.

However, the price of fuels such as gasoline and diesel either remained the same or decreased slightly. Gasoline remains at 900 won, which is a hundred won less than it was in May. Diesel remains at 400 won, which is 200 hundred won less than it was.

Since last year, North Korea has been pursuing various construction projects as part of its goal of building a strong and prosperous state by 2012. It is possible that fuel heading for construction sites is finding its way into the markets.

Here is the data in JPG format!

Read the full story here:
Market Prices Holding Firm
Daily NK
http://www.dailynk.com/english/read.php?cataId=nk01500&num=6568
Yang Jung A
7/7/2010