Archive for the ‘General markets (FMR: Farmers Market)’ Category

Market fees may be lowered on some North Korean markets

Tuesday, July 30th, 2019

Benjamin Katzeff Silberstein

Daily NK:

“Merchants working in the markets feel that business this year is worse than last. I’m not sure if the authorities were thinking about the merchants when they made the decision, but it’s good that they have reduced the taxes in Pochon, Sinpa and Kimhyongjik County,” said the source in Ryanggang Province during a telephone interview.

According to the source, market fees in Pochon and Sinpa County are relatively low compared to other areas. The fees for industrial goods were reduced from 1000 won to 500 won. Fees charged to vendors of food and ice cream were lowered from 500 won to 300 and 200 won, respectively.

The market fees are determined based on the size of the city, the size of the stall and the type of product being sold. The rough national average fees being charged per day as of early this year was 1500-2000 KPW for meat stalls, 1000-1500 KPW for industrial products (clothes) and 500-1000 KPW for food and vegetables.

According to the Center for Strategic and International Studies’ analysis of markets in North Korea, the authorities collect over $56 million USD per year from the markets. The largest market in North Korea, Sunam Market in Chongjin, generates an estimated $840,000 USD for the government.

Before the markets were formally recognized, market fees were 3-5 won until the early to mid 1990s, before being raised ten-fold in 2001, to 30-50 won. After the regime legalized the country’s private markets in 2002 with its ‘New Economic Management Improvement Measures,’ the fees rose another ten-fold.

Source:
Market fees in North Korea set for reduction in parts of border region
Kang Mi Jin
Daily NK
2019-07-30

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Taxes increase on some North Korean markets

Friday, May 3rd, 2019

By Benjamin Katzeff Silberstein

This sort of news is very interesting, particularly in context: I’ve heard from people who deal with North Korean firms that some of them have received orders to tighten up their accounting, and report their assets to the state in greater detail. Taken together, these snippets of information suggest an overall difficult economic situation, though not desperate or in crisis-mode, where the state is taking more and more measures to drive in cash from the public.

Daily NK:

Sales fees levied on private distributors have risen in some areas of North Korea. The fees are managed by North Korea’s collection agency and essentially provide a source of tax revenue for the state. Private distributors are expressing discontent over the changes as many are suffering under the country’s already poor economic conditions.

“The authorities recently began demanding outrageous and unfair selling fees from private distributors,” said a South Pyongan Province-based source on April 25. “Collection offices (i.e. tax offices) attached to local people’s committees are required to pay varying fees depending on the product, and the number of fees have been doubled.”

These de facto tax offices were established in each city and county as part of the July 1 Economic Management Improvement Measure in 2003 and are managed by the Ministry of Financial Administration. The offices collect fees for land use, market stalls, and various other reasons.

“The authorities are demanding a huge amount of fees to gain control over and restrict the activities of private business people who live in Pyongsong but bring in products from Sinuiju, Rajin-Sonbong, Nampo and Hyesan,” said a separate source in South Pyongan Province.

“Soybean oil sellers, for example, had to pay 3% of their income before, but now have to pay twice that amount.”

The skyrocketing fees are likely due to the fall in tax revenue arising from the economic difficulties the country is facing.

“The government increased the fees they were collecting just as incomes fell among private business people,” she said. “The authorities are simply taking money from the people to make it seem like the state is self-sufficient.”

North Korean authorities have made the fee system more sophisticated while raising fees as part of efforts to generate more income for the regime.

Article source:
North Korea doubles de facto sales tax levied on distributors in some areas
Mun Dong Hui
Daily NK
2019-05-03

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North Korea’s economic situation, going into Hanoi: a roundup of the data

Thursday, February 21st, 2019

By Benjamin Katzeff Silberstein

The Hanoi summit is under a week away, Daily NK recently put out new market price data, and I’ve finally had time to update my dataset. There seems like no better time than the present to take a look at some of the numbers we have available for the North Korean economy, thanks to outlets such as Daily NK and Asia Press/Rimjingang.

Currency

Let’s start with the exchange rate. A few weeks ago, the (North Korean) won depreciated quite significantly against the USD, which I wrote about here. At 8,500 won/1usd, the USD-exchange rate on the markets hit its highest point since the inception of “maximum pressure”. The graph below is shows the average market exchange rate in three North Korean cities for won-to-USD.

Graph 1. Average won-USD exchange rate on markets in three North Korean cities, spring of 2017–February 2019. Data source: Daily NK.

As the graph shows, the won rebounded somewhat after the initial spike in early January. According to the latest data point, the exchange rate stands at 8190 won, still somewhat higher than the average for the period, 8136, but barely.

What could have caused this spike? One possibility is that the government has started to soak up more foreign currency from the market, because the state’s foreign currency coffers are waning. After all, given the vast trade deficit, the continued necessity of spending hard currency on things like fuel (bought at higher prices through illicit channels to a greater extent) and other factors, it would make a great deal of sense. Currencies fluctuate all over the globe, sometimes based even on loose rumors that fuel expectations. One anonymous reader who often travels to North Korea for work heard from Korean colleagues that accounting conditions for firms had gotten stricter, likely because the government wants to be able to source more foreign currency from the general public.

It is also noteworthy that while the Daily NK price index reports that the USD-exchange rate has gone back to more normal levels, the Rimjingang index remains at very high levels. Its latest report (February 8th) has the USD at 8,500, and on January  10th, it registered 8,743 won, a remarkably high figure that the Daily NK index hasn’t been near since early 2015. The difference between the two may simple come from the figures being sourced from different regions, or the like. North Korea’s markets still hold a great deal of opportunity for arbitrage, not least because of the country’s poor infrastructure.

So, it does seem like there may be some unusual pressure on the won against the dollar. What it comes from is less clear, but the state demanding more hard currency from the semi-private sector and others may be one important factor. In any case, we shouldn’t be surprised if the trend continues, unless sanctions ease soon.

At the same time, while the RMB has appreciated against the won over the past few weeks, it hasn’t really gone outside the span of what’s been normal over the past few years.

Graph 2. Average exchange rate for won to RMB, average of three North Korean cities, late 2015–early 2019. Data source: Daily NK.

The average exchange rate for RMB since the start of Daily NK’s data series in late 2015 is 1228 won. The latest available observation gives 1241 won/RMB, and the RMB has appreciated against the won over the past few weeks. The Rimjingang data, here, too, gives a higher FX-rate for RMB than Daily NK, at 1250 won. Their index, too, shows the FX-rate for RMB going up over the past few weeks, but not to levels out of the ordinary. Still, if the won continues to depreciate against both the dollar and the RMB, it may be a sign of a more persistent foreign currency shortage.

Food prices

Rice prices remain as stabile as ever, in fact, even more so than this time last year. They continue to hoover between 4,500–5,000, with the latest observation being at 4,783.

Graph 3. Average rice price for three North Korean cities, spring of 2017–early 2019. Data source: Daily NK.

This should not necessarily be taken to mean that North Korea’s current food situation is not problematic. Even with increasing harvests in the past few years, it’s always been fragile. The past year’s drought reportedly took a toll on the harvest. Though market prices aren’t suggestive of any shortages as of yet, that could change in the months ahead. The latest harvest was likely lower than those of several previous years and difficulties in importing fertilizer may have contributed, but the dry weather was the main factor.

Even with a slightly lower harvest than in previous years, it seems that structural changes in agricultural management has improved agricultural productivity to such an extent that food safety isn’t severely threatened even with a reduced harvest.

Gasoline

Gas prices appear to have stabilized around a sanctions equilibrium, of sorts, since a few months back. The past year hasn’t seen any spikes near those of the winter in 2017, when prices went above 25,000 won per kg. For the past year, the price has mostly hovered between 13,000 and 15,000 won per kg. The last observation available from Daily NK, is at 15,200 won per kg. This is slightly higher than the average of the past 12-month period, 13,500 won per kg. A more recent report from Rimjingang puts prices at 13,750 won per kg, so perhaps prices have declined over the past few weeks.

What’s likely happened is that China has settled on a comfortable level of enforcement of the oil transfers cap, for now. (For a detailed look at fuel prices in North Korea and Chinese sanctions enforcement, see this special report.)

Graph 4. Average gasoline price, three North Korean cities, early 2018–winter 2019. Data source: Daily NK.

There is lots to be said about gas prices and their impact on the economy, but for now, it looks like supply of gasoline in North Korea is restricted, but stabile.

Hard currency reserves

I unfortunately don’t have any data to present on this issue, but it’s too important not to mention. We don’t know how large North Korea’s foreign currency reserves are, but all throughout “maximum pressure”, people have been speculating that they’ll soon run out. One South Korean lawmaker said in early 2018 that by October that year, North Korea would be out of hard currency. That clearly didn’t happen.

The lack of stabile foreign currency income may still be a problem for the regime, as mentioned above. It’s hard to imagine how it couldn’t be a huge headache. Look at the following graph for example, showing North Korea’s trade (im)balance with China, throughout 2017 and the first few months of 2018.

Graph 5. North Korea’s trade balance with China, in $1,000 terms. Data source: KITA.

Let’s assume that China is simply letting North Korea run a trade deficit, with only some vague future promise of payment in the form of cheap contracts for coal and minerals. Or, let’s say that China is even just sending North Korea a bunch of stuff without requiring any form of payment whatsoever. It seems highly unlikely to me that even a government like China would support the full extent of these imports. Even if North Korea is only paying in hard currency for a relatively small proportion of what it imports from China, that’s still a lot of money that’s just leaving the vaults, with virtually nothing coming in to replenish them. How long can this go on for? Probably longer than many estimated at the onset of “maximum pressure”, but certainly not forever.

Summary

In sum, judging by the numbers, North Korea’s domestic economic conditions appear stabile but quite difficult. No sense of widespread, general crisis is visible in the data. Nonetheless, the regime is likely under a great deal of stress concerning the economy. How much is hard to tell, but definitely enough for some form of sanctions relief and/or economic cooperation to be high on their agenda for Hanoi.

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North Korean officials disheartened over this year’s harvest

Wednesday, August 8th, 2018

Benjamin Katzeff Silberstein

Daily NK:

As North Korea continues to reel from an unprecedented heat wave, the authorities are conducting a nationwide assessment of the damage that has been inflicted on crops as well as on-site farm visits, report sources in the country.

“The temperature has risen daily and there’s no rain, so crops all over the country are drying out,” said a North Hamgyong Province-based source on August 6. “The authorities are investigating the damage done to the agricultural fields.”

The source said that the authorities have sent investigative teams to farms throughout the country who are taking photos of the damage and sending them back to central headquarters.

The roots of the corn crops have yellowed because they have dried out from the lack of rain. North Koreans consider the agricultural season to be “finished” this year. Farmers have suffered from both the double impact of intense heat and drought.

In Musan County, where mining activities have stopped, many miners have sought to obtain land after facing significant difficulties. The intense drought has created concerns about how they will feed their families.

“There are many people saying that the ‘weather is killing us’ while beating their fists against their chest in front of their dying crops,” said a source in Ryanggang Province.

“The authorities likely wanted to show people that they are keeping an eye on things and making an effort to improve the situation.”

Officials who are part of the investigation teams, however, are reportedly saying that there is no hope in recovering from this year’s agriculture troubles.

“Officials have dwindling hope about this year’s harvest, and some even say the only thing to do is wait for the intense heat to end,” the Ryanggang-based source added.

Meanwhile, the state-run publication Rodong Sinmun has reported, “Farmers are taking it upon themselves to conduct a powerful campaign to prevent damage [to the crops] from high temperatures and drought.” The state authorities are emphasizing “self-sufficiency” as a tool to combat damage to crops, which also hints that the authorities have little in the way of clear cut measures to deal with the situation.

Article source:
Disheartened North Korean officials label this year’s harvest ‘dead in the water’
Kim Yoo-jin
Daily NK
2018-08-08

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North Korean market update

Monday, February 5th, 2018

I recently provided this information to Radio Free Asia (in Korean), so I thought I would do a quick blog post about it in English.

I have documented over 480 official markets in North Korea. Some two-dozen are new in the Kim Jong-un regime. Hundreds more markets have been moved, renovated, or expanded since KJU took over. Below are just two recent examples (I have published quite a few in the Korean media via RFA’s Korea service).

This new market is in Kwanhun-dong, Kaesong City:

This market area is probably an expansion of the incumbent Kwanhun-dong market since it is located in the same 동. I can’t imagine that there would be two official markets in the same 동, but I can’t say for certain. Along the river, on the northern side of the market, there appear to be numerous individual stalls, so it is possible that food is sold here (this would seem to make sense since it is next to the river). This particular market area was built sometime after 2015-8-16. It was constructed in increments, but appears to have been completed 2017-4-1.

This second new market is in Phyongsan, North Hwanghae Province. Phyongsan already has an official market (most towns only have one), so it is possible that this new market is meant to replace the old one (a fairly routine occurrence in recent years). We will have to wait and see in subsequent imagery if this new market will replace the old one. The new market was built between 2016-10-5 and 2017-5-2.

And just as a reminder to readers, these are not “black markets,” “grey markets,” or “informal markets”. These are formal markets. They are legal operations carried out under explicit authorization by the state. Employees (all female) are legally employed in the markets, and have ID badges that list their employer as the local market.  Vendors pay fees and taxes to sell in these markets (they are integrated into the public finance system).

Also, the sign over the entrance to these markets uses the Korean word 시장.

 

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North Korean merchants resisting price controls on markets

Tuesday, March 21st, 2017

By Benjamin Katzeff Silberstein

Reports Daily NK:

Food prices in the past closely mirrored the ups and downs of rice prices in North Korea. For example, if rice prices climbed by 1,000 KPW per kg, then corn prices could also be expected to rise by approximately 500 KPW. But that trend is beginning to change.
In addition, North Korean rice prices used to exhibit sensitivity to currency exchange rates, but rice prices have recently been falling and climbing independently of the exchange rates.
To calm volatility, the authorities have entered the markets and attempted to control prices, but merchants have widely rejected these measures. Merchants who sell similar products have been collaborating with one another to set prices or decide when to withhold products from sale.
Merchants know that the authorities attempts to crackdown on the marketplace usually fizzle out over time, said a separate source in Ryanggang Province. The vendors will pretend to agree and listen to the authorities, but then they will secretly raise the prices.
As rumors spread that large shipments of pork were being smuggled in, shrewd merchants refrained from putting pork up for sale because they were expecting the price to rise. They then sold large quantities at a higher price, before the prices gradually began to fall again, she continued.
One expert believes that this development signals how prices have moved out of the domain of the authorities and under the influence of the black market.
The price volatility we are currently seeing in North Koreas markets is a common element for underdeveloped countries, said Professor Lim Eul Chul, from the Institute for Far Eastern Studies (IFES) at Kyungnam University. He went on to explain that pricing decisions by individual actors involved in market activity are becoming increasingly relevant, but the authorities are having trouble keeping up with the information.
In the past, market agents carefully watched the authorities reactions when setting prices, but the markets have developed and now it is the authorities who are following behind. Big merchants have the power and sway to move the market and control prices. We can expect this trend to continue, he concluded.
Full article:
Merchants resist price controls
Kang Mi Jin
Daily NK
2017-03-20
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North Korean rice prices have dropped drastically one year after the sanctions. Why?

Wednesday, February 8th, 2017

By: Benjamin Katzeff Silberstein

Prices for rice have fallen in North Korea. Daily NK, which tracks prices of rice and foreign currency in three North Korean cities, reported in the beginning of this week that rice prices have fallen thanks to continued development of the market economy and a steady flow of goods to and from China. This has happened despite expectations that the sanctions that the UN passed one year ago would cause inflation.

In theory, the sanctions were supposed to curb trade with China because they targeted North Korea’s crucial minerals trade. In practice, a steady stream of news from the border suggests that trade has continued, albeit with periodic squeezes, following a familiar pattern of China’s sanctions implementation waxing and waning.

This makes a lot of sense. A better functioning and more efficient market should logically lead to lower prices, as should increased trade with China, given the increase in supply. But neither of these two factors explains the timing. There are several other elements to take into consideration when analyzing price changes in North Korea. I am not making any certain claims here about the relatively drastic shift in prices, but rather, pointing to a few factors that may have contributed.

First, one must ask: how big is the drop? The short answer is: pretty big, but not unprecedented. The following graph shows the last and first price observations in the Daily NK market prices database for every year since 2010–2011. (I’ve excluded 2009–2010 because of the distortions that the 2009 currency reform creates in the data.) It shows that a similar price drop happened between 2011 and 2012 as well.

Graph 1: rice prices in North Korea, last and first year observations. Graph by NKeconwatch.com. Data from Daily NK.

This latest price point, however, is not a historic low-point. We’ll see if prices continue to drop over the weeks, but as of now, there are fairly near time points when prices have been lower, such as April 2014 (see graph further down).

Prices are seasonal to a degree. Though the market system and the public distribution system (PDS) obviously function under very different mechanisms, the following graph from the World Food Program’s 2013 food and crop assessment (the latest exhaustive one they published, to my knowledge) underscores the point that supply varies depending as the harvest draws farther and closer, and suggests that overall supply tends to be particularly good in December and January in other years as well:

Figure copied from World Food Program Food and Crop Assessment in the DPRK, November 2013, showing seasonal variations in government grain distribution.

Overall, the story under Kim Jong-un’s tenure seems to be one of price stability. Since around the spring of 2014, prices have moved in a fairly delineated fashion (as visible in the right half of this graph):

Rice prices, average of three cities, 2012–2017. Data from Daily NK, graph by NKEconwatch.com.

Second, though it would be intuitively easy to conclude that the drop in prices was caused by better functioning market mechanisms and agricultural management changes, this doesn’t seem to be the whole story. Again, such changes are crucial and may well have played a large role in the greater price stability of the past few years. But they would not explain this sudden shift.

Instead, the story seems to partially be the opposite, one of government action. A few days ago, Voice of America reported that PDS distributions in January of this year have, according to a World Food Program official, gone up by around ten percent as compared to the same period last year. Both in September and November, the North Korean government imported significantly larger quantities of rice than usual. These imports presumably go out through state channels rather than the private markets.

So while it’s impossible to isolate different effects from one another, it looks like the state can still have a significant impact on the food economy, even with the strong and continuously evolving market sector. This impact seems particularly likely this time around, given the sudden drop in prices. Only time will tell whether drop continues, or if prices continue to bounce within the limits of the past few years.

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Real estate prices up in Pyongsong

Saturday, January 7th, 2017

By Benjamin Katzeff Silberstein

According to DailyNK, prices of real estate are skyrocketing around the wholesale market in Pyongsong, whose trade is tightly connected to that of the richer Pyongyang:

“The price of a unit in this building near Yokchon-dong, located near the railway station and a major road leading to Pyongyang and Sinuiju, has sharply risen to 60,000 USD from 40,000 USD. Although the building is not in the center of the city, many wholesale vendors want to buy these homes, resulting in the price jump,” a source in South Pyongan told Daily NK on January 4.
“The residential property is attractive to major market heavyweights even though it wasn’t built recently. Ease of transportation seems to be the major pulling factor.”
Pyongsong City is home to Doksan Farmers’ Market (formerly Pyongsong Market),  the largest wholesale market in the nation. The market is constantly busy with merchants from other regions because it not only offers trade in commodities but also deals with the labor market, foreign currency, and the services sector.
Previously, the real estate trade was prohibited in North Korea, but the authorities have tacitly permitted it since the 1990s, with an increasing number of people now purchasing houses. Due to restrictions in North Korea that make it difficult to move about freely, merchants prefer to reside closer to the market.
“In the past, Okchon-dong was more popular because the General Market was located in it. But there were many problems because it was difficult for the wholesale merchants with big vehicles like trucks to come and go along the narrow roads. For this reason, Yokchon-dong became more popular because they can directly unload their cargo near the residential area, which is located at a major transportation hub,” an additional source based in Pyongsong said.
Full article:
Pyongsong prime real estate prices are skyrocketing
Seol Song Ah
Daily NK
2017-01-07
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Musan Market damaged in flooding

Thursday, December 8th, 2016

Other outlets have already covered the recent flood damage using satellite imagery (see here and here).  I added one small contribution in Radio Free Asia today…Here is a satellite image of the Musan Market (무산시장) taken before and after the recent flooding:

Images: Google Earth. Top: 2014-1-13, Bottom: 2016-9-14

Nearly half of it was washed away when the river rose.

I will have more to say on this topic after the holidays.

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Where do North Korea’s nuclear scientists go shopping?

Sunday, November 27th, 2016

yongbyon-market-2016-8-21

Pictured Above (Google Earth): A 2016-8-21 image of the general market (종합시장) at the Yongbyon Nuclear Research Center residential complex.

Needless to say, security at the Yongbyon Nuclear Research Center is tight, and not much is known (publicly anyhow) about the lives of the people who live there. However, with commercial satellite imagery (and a little know-how), we can get a glimpse of life inside the security perimeter.

No doubt the residents of the compound live in “gilded cages,” enjoying above-average standards of living but under greater control and surveillance. However, in June of 2003, the year that the DPRK legally converted decades-old “farmers’ markets” to “general markets” (a change that involved not only a change in name, but also a change in administration), the DPRK constructed a new general market for residents of the Yongbyon Nuclear Research Center which appears to have replaced the smaller outdoor farmers’ market.

yongbyon-market-2003-6-2

Pictured above (Google Earth: 2003-6-2): Construction of the new general market outlined in yellow. Structure of the former farmers market that was torn down in orange.

The market appears to be composed of four warehouses each with a floor-space of appx 550 square meters (2,200 square meters total). It is possible that each building specializes in some form of commerce (food, household goods, etc). In some of the historical imagery of the market we can see people outside meandering between the buildings.

It is interesting to think that there are vendors here who are probably not related to the nuclear program. No doubt these individuals would have to be granted security clearances to work in this market.

But perhaps most notably about the residential quarter, we can see 15 new apartment buildings being constructed over the last couple of years.

yongbyon-housing-2014-9-24

(Google Earth: 2014-9-24)

yongbyon-housing-2015-11-9

(Google Earth: 2015-11-9)

yongbyon-housing-2016-8-21

(Google Earth: 2016-8-21)

I do not know if these new apartments are for scientists or janitors, but their construction marks a not-so-subtle signal that employment in the area is on the increase.

Here is coverage of my work on this post in RFA and KBS (English, Korean).

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