North Korean Economy Watch

UPDATE 1: Luke Herman provides some additional infomration here.

ORIGINAL PSOT: January has been quite interesting for DPRK watchers as we are seeing the steps taken to establish the legitimacy of Kim Jong-un. Below I have cataloged some visible components of this process:

Kim Jong-un’s “on the spot guidance” (OSG):

Kim Jong-un began the year with a visit to Kumsusan palace to pay respects to president Kim Il-sung and leader Kim Jong-il. The political and cultural symbolism speaks for itself.

Kim Jong-un’s second guidance trip (reported on the same day) was reportedly to the Seoul Ryu Kyong Su 105 Guards Tank Division. This visit is symbolically important because it was on a guidance trip to this very same division that (according to the North Korean narrative) Kim Jong-il began his “Songun” (Military First) leadership.  According to KCNA (2010-8-24):

An oath-taking meeting of servicepersons of the three services of the Korean People’s Army took place at the Ssangun-ri Revolutionary Site in Sukchon County, South Phyongan Province, on Tuesday on the occasion of the 50th anniversary of Supreme Commander Kim Jong Il’s start of the Songun revolutionary leadership.

The reporter and speakers at the meeting recalled that Kim Jong Il started the Songun revolutionary leadership by providing field guidance, together with President Kim Il Sung, to the Seoul Ryu Kyong Su 105 Guards Tank Division of the KPA on August 25, Juche 49 (1960) stationed in Ssangun-ri.

Here is a satellite image (Google Earth) of the Ssangun-ri Revolutionary Site (쌍운리 혁명사적지,  39°25’3.20″N, 125°44’30.74″E):

Joseph Bermudez wrote more about the Seoul Ryu Kyong Su 105 Guards Tank Division here. Kim Jong-il last visited the unit on 2010-12-31.

The remainder of Kim’s guidance trips in January have been overwhelmingly military in nature:

KPA Air Force Unit 1017
Concert Given by Military Band of KPA
Flight Training of KPA Air Force Unit 378
Demonstration by Players of Western Area Aviation Club (KPA)
Mangyongdae Revolutionary School (KPA)
Lunar New Year Reception
Machine Plant managed by Ho Chol Yong (KPA)
Kim Jong Un Inspects Command of KPA Large Combined Unit 671
Kim Jong Un Inspects KPA Air Force Unit 354
Kim Jong Un Inspects KPA Unit 3870
KPA Unit 169 honored with the title of the O Jung Hup-led Seventh Regiment
Music and dance performace
Hero Street Meat Shop
Pyongyang Folk Village (KPA)
2012 New Year’s concert “The Cause of the Sun Will Be Immortal” given by the Unhasu Orchestra
Seoul Ryu Kyong Su 105 Guards Tank Division
Tribute to Kim Il-sung and Kim Jong-il at (Kamsusan)

The media/propaganda campaign:

1. We saw a much-blogged-about hour-long documentary highlighting Kim Jong-un’s bona fides. At this point I don’t have much to add except a translation of Kim Jong-un’s quote in the film which is provided by C. La Shure in the Korean Studies Digest:

“I am accustomed to working through the night and so am not bothered by it. The most joyous and happiest moments for me are when I can bring joy to the comrade supreme commander. Thus, though I have stayed up several nights, I have worked without knowing weariness. Even when I work through several nights, once I have brought joy to the comrade supreme commander, the weariness vanishes and a new strength courses through my whole body. This must be what revolutionaries live for.”

2. Kim Jong-un’s “motherly” or “nurturing” traits have also been emphasized — imitating not only Kim il-sung’s appearance but also his public mannerisms (a la Bryan Myers):

Pictured above:  (Top) The cover of B.R. Myers’ book, The Cleanest Race. (Bottom) Kim Jong-un’s visits to KPA Unit 354 (L) and the Mangyongdae Revolutionary School (R)

3. Efforts may be underway to venerate Kim Jong-un’s mother.  Ko has reportedly been mentioned in the North Korean media.

4. Kim Jong-un has issued several autographs which look remarkably like his father’s (and grandfather’s):

Pictured above: (L) Kim Jong-il’s signature taken from North Korean television. (R) Kim Jong-un’s signature as reported by KCNA on 2012-1-3. The Choson Ilbo also picked up on this.

5. The KCNA web page now has a special content filter built specifically to highlight Kim Jong-un’s activities.  They have also started printing his name in a larger type.

6. Kim Jong-un is now part of the DPRK’s infamous criticism sessions. According to the Daily NK:

“The Central Party is propagandizing the greatness of Kim Jong Eun through criticism sessions, and coming down hard on anybody who is reported to have said anything hinting at any doubt of his greatness,” the source said, adding, “all cadres are being careful not to get caught out by this, without exception.”

7. Kim Jong-un  is being called “father” in the official media.  According to the Daily NK:

Choson Central News Agency (KCNA) on the 25th reported that Kim Jong Eun made a visit to the Mangyondae Revolutionary School. During his visit, Kim Jong Eun was greeted by staff and students as “Dear Father,” a designation stressing loyalty.

Rodong Shinmun, a day before, ran an article entitled ‘The sun shines forever’. It stated “our people broken hearted at the loss of our nation’s Father (Kim Jong Il ) and out of love our father (Kim Jong Eun) warmly welcomed the return of our people from overseas.” This statement showed that Kim Jong Eun has succeeded being called ‘father’ following Kim Jong Il.

The newspaper went on to praise Kim Jong Eun, “our people are all one in our father and persist with single-minded unity and great heart.”

8. The Lunar New Year holiday was co-opted to celebrate the rise of Kim Jong-un. In addition to public ceremonies and performances in honor of one of the three leaders (Kim Il-sung, Kim Jong-il and Kim Jong-un), the practice of distributing holiday rations in the name of the leader was resumed. In a sign of the “back to the future” economic policies which may be on the horizon, the DPRK is rumored to be interested in reviving nation-wide food distribution through the PDS.

Institute for Far Eastern Studies (IFES)
2012-1-25

A month into Kim Jong-un’s ascension to power, it is reported that food distribution is likely to resume nationwide in North Korea.

Many experts evaluate this as a symbolic measure to propagate the construction of a powerful economy and improve the lives of the people. For the North Koreans, the most apparent and obvious economic accomplishment is the improvement of the food situation. Thus, North Korea is most likely to take action to normalize food rations as its top priority.

According to a statement made by a South Korean government official on January 20, “Kim Jong-un and his leadership will begin the food distribution as a way to prove to its people about changes forthcoming in the new regime.”He also added, “After years of propagation for the building of a strong and prosperous nation, they must demonstrate it to the people with noticeable results.”

The amount of rations to be provided is still unclear. However, the source emphasized that it was very likely for rice rations to resume, especially with the approaching national holidays, such as the Lunar New Year and Kim Jong-il’s birthday (February 16).

He also commented that “the food distribution will be a nationwide movement and the food ration system will go into effect based on the distribution network of available food supply.”

According to the Food and Agricultural Organization (FAO) and the World Food Programme (WFP), North Korea’s food production in 2011 compared to the previous year rose by 8.5 percent, sitting at about 5.48 million tons (of rough grains or 4.66 million tons of milled grains).

The minimum amount of food consumption in North Korea is 5.4 million tons, but a shortage of about 400,000 tons is expected, including the international food aid and industrial food imports. Among the recent years, this marks the largest deficiency in food supply.

However, such shortages can be overcome with additional food imports and distributing mainly rice reserves.

The last national food distribution in North Korea was in 2005, seven years ago.

North Korea is also likely to exert more effort in food processing production to improve the distribution of daily necessities. With relatively little dependence on raw material imports, North Korea is planning to improve the food situation through expanding the food processing production in agricultural, fishery, and livestock industries, with less competition with Chinese products.

KCNA reported that North Koreans celebrated the lunar new year by paying tribute to Kim Jong-il:

On the lunar New Year’s Day, the Korean people are ardently yearning for the leader Kim Jong Il.
People are seen laying flowers or floral baskets before portraits of smiling Kim Jong Il displayed throughout the country, recollecting the undying feats he performed for the country and the people.
An old man, Ri Thaek Ju, living in Sosong District, Pyongyang, told KCNA, “I don’t think the leader left his people. He is among the people. He is greeting the Lunar New Year with us.”

They also laid floral baskets at Kim Il-sung statues (video here):

Floral baskets were placed before the statues of President Kim Il Sung in different parts of the country on the lunar New Year 2012.
Service personnel and Pyongyangites from all walks of life and school youth and children and overseas compatriots staying in the socialist homeland, visited his statue on Ryongnam Hill to pay tribute to him.

…And they also performed plays offering well wishes to Kim Jong-un:

Schoolchildren’s performance “Country of Eternal Sun” took place at the Mangyongdae School Children’s Palace Monday on the lunar New Year 2012.
The performance began with prelude “Please accept, the dear respected Kim Jong Un, our greetings on lunar New Year.”
The performers made a deep bow to Kim Jong Un, representing the unanimous best wishes of the younger generation of the DPRK.

So there are “three generations” of post-revolution North Koreans, and each one now has their own leader to pay homage to on Lunar New Year. Interestingly, Lunar New Year was banned by the DPRK until the 1980s as it was classified as a Chinese holiday. But why ban a cultural holiday when you can co-opt it for political purposes?

The AP also published this story.

UPDATE 1: On January 24, KCNA reported that Kim Jong-un hosted a banquet for senior members of the North Korean government.

UPDATE 2: On January 25, the Daily NK reported some very interesting information from within the DPRK which further shows how the Lunar New Year has been co-opted as a tool for the legitimization of Kim Jong-un’s rule:

A Chinese trader who resides in Pyeongseong, North Korea, arrived in Dandong on January 21 for the start of the Lunar New Year holiday period. The trader, who in this article we will call ‘John’, received permission to visit China after waiting over a month to leave the country since the death of Kim Jong Il. John met with his suppliers in Dandong to order items he would take back into North Korea, before departing for Shenyang to visit relatives.

Daily NK met with John in Shenyang on January 22 to ask him whether or not the rations announced by North Korean authorities had actually been distributed as planned. As he is a Chinese expatriate, he says he did not receive any rations this time, however “ordinary people did get them. The rations were half white rice and half mixed-grain rice.”

“Even within Pyeongseong, people got different rations depending on what street or neighborhood they live in – some got 3 days worth, others got 5. Our People’s Unit gave 3 days. But that wasn’t the problem; in one area people got grain rice mixed with corn, and the really unlucky amongst them were disappointed to find that their rations had already gone off.”

“On the way here I also heard from people living in Sinuiju who were given corn soup rather than rice of any sort,” John says. Given that corn soup costs roughly half as much to provide as other grain rations, evidently the government distributed corn-based rations in some cities and counties in order to help carry out its plan.

According to John, authorities also offered to supply fish to citizens. “They handed out coupons to buy a sailfin sandfish for 2,800 won and called this an order from Kim Jong Eun.” With this coupon citizens could head to a government-run store and purchase the fish for 2,800 won, however John says that most people declined to buy from the government-run stores when fresh sandfish could be bought from the market for 3,300 won.

Regarding crackdowns on foreign currency, John said that “It would be hard for people like me to live if the government stopped people using the Yuan. When I purchase stock I have to pay for it in Yuan, so if I wasn’t able to do that I wouldn’t be able to trade. That might end up being the case again. The ‘gruppas’ (inspection teams) are showing up to carry out crackdowns on illegal foreign exchange transactions, but this has just driven most people to do it in the privacy of their own houses.”

“Even people who lose their foreign currency in the crackdowns can get it back with a bribe. How can you stop that? Even cadres like foreign currency, so how can it work if they order a crackdown?”

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

According to Yonhap:

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

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

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

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

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

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

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

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

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

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

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

According to the Daily NK:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Institute for Far Eastern Studies (IFES)
2011-12-8

It has been two years since the implementation of North Korea’s currency revaluation and the South Korean government recently has presented an assessment of it, evaluating it as a complete failure, as exchange rates have skyrocketed and inflation set in.

It has been largely evaluated as having weakened the government control over the market and the people.

In the report released by South Korea’s Ministry of Unification (MOU), the prices of rice and exchange rates have returned previously to the level before the measure went into effect. The prices of rice per kg that cost between 20 to 40 KPW in December 2009 has jumped to 3,000 to 5,000 KPW as of November of this year, which is more than a 2,300 times increase.

The price of rice that went for 2,400 KPW early this October is believed to be close to 5,000 KWP currently.

The fluctuation of rice price is allegedly associated with preparation for next year’s celebration (i.e., of North Korea becoming a “strong and prosperous nation”). According to an anonymous North Korean government official, rice is being stockpiled to be released next year during the celebration period.

North Korea has self-proclaimed 2012, the centennial birthday of Kim Il Sung, as the first year of the “strong and prosperous nation.” While it may be ephemeral, it said it will normalize rice distribution for next year.

The exchange rate for KPW in December 2009 was 35 North Korean won to one USD; a year later, it soared to 2,000 won, and it is currently worth 3,800 won.

At the time of the currency revaluation, the usage of foreign currency was completely banned. This in return made the exchange rate spiral up. In February of this year, North Korea eventually abandoned this measure.

One Chinese yuan is also worth about 400 KPW, standing shoulder to shoulder with the value of the US dollar. About 300 markets that exist currently in North Korea are affected by the soaring exchange rate of the yuan, raising the prices of Chinese products on the market.

North Korea also has increased wages for the workers a hundred fold during the currency redenomination; but life for the people has become harder due to hyperinflation.

The average monthly salary of a North Korean worker is about 3,000 KPW; however, the monthly expenses for an average family of four hovers around 100,000 KPW.

The MOU has announced that the currency reform implemented by the North Korean government two years ago was intended to weaken the role of the markets, and regulate the new-rich, generate supplies of capital for the construction industry, and adjust the amount of domestic currency in circulation. In the end, the reevaluation ended up achieving the opposite.

At the time, the government prohibited sales of imported and industrial products on the market and promoted marketization of agricultural goods. But the people’s dependency on markets is as high as ever, leading to a relaxation of market regulation in February 2010.

The MOU also stated, “There is growing distrust of the government among North Koreans from the failed policy which in effect undermined the power of the government to control the market and the people.”

The Daily NK also reported some similar information:

The price of rice in North Hamkyung Province and other areas along the Sino-North Korean border has passed 5,000 won per kilo. This represents a rise of over 1,000 won in little over a fortnight, after similar reports came out two weeks ago asserting that the price had passed 4,000 won in late November.

Sources have independently reported that the 5,000 won mark has been passed in markets in the cities of Hoeryeong and Musan, both in North Hamkyung Province, and Hyesan in Yangkang Province. The exchange rate of the Chinese Yuan against the North Korean won has simultaneously jumped from the low 700s to 800 in Hyesan and over 1,000 in Musan and Hoeryeong.

Reporting the news, one Hoeryeong-based source told The Daily NK, “The price rises have left people living hand-to-mouth, and the endless government controls and crackdowns mean people have no idea what to do. The atmosphere in the jangmadang has gotten really ugly on rumors that prices are going to rise further.”

A source from Musan pointed out, “The Yuan seems to go up every day, and now that rice has passed 5,000 won a kilo people have no idea what they’re going to eat to survive.”

“We’ve already given up on the idea of eating rice cake for the Chinese New Year,” the trading source from Hyesan said, going on, “Chosun rice now costs 5,000 won a kilo while Chinese rice is 3,800 won. Wherever you go people are up in arms about it.”

Most locals blame the rapid rise in the cost of living on the strength of the Yuan against the North Korean won. In this way, the lack of confidence in the local currency promoted and enhanced by the 2009 currency redenomination seems to be having a direct effect on the price of rice.

“Everybody prefers to use Renminbi to Chosun money, so by the time you wake up in the morning the thing which has risen again is the price of the Yuan. Because the exchange rate is rising, it is inevitable that the price of rice goes up as well,” the source from Hyesan explained.”

Interestingly, according to the border region sources there is no great difference in the physical volume of rice in the market. However, because the Yuan has become the main currency for both the supply and demand sides of the market, prices have risen in accordance with the change in the exchange rate. The use of the Yuan as the medium of exchange between locals was already becoming institutionalized even before the recent rises.

The rapid price rises are also encouraging traders to try and obtain more locally-grown rice.

The source from Hyesan said, “Train stations in North Hamgyung and Hwanghae Provinces are in complete chaos when there is a train because of all the traders trying to bring in local rice, as well as the agents regulating them,” while the source from Musan said, “Many people are stocking up on food while they can because of reports that food prices will keep rising until next spring.”

Marcus Noland also blogged about the price of food and US$ exchange rate in the DPRK last week.

Read the full Daily NK story here:
Rice Tops Key 5,000 Won Mark
Daily NK
Lee Seok Young
2011-12-13

UPDATE (2011-12-13): According to Radio Free Asia (in Korean), the Chinese government has agree to provide the DPRK with new meteorological equipment.  According to the article:

중국 정부가 유엔 산하 기구를 통해 북한에 첨단 기상관측장비를 지원하기로 결정한 것으로 밝혀졌습니다.

정아름 기자가 보도합니다.

중국정부가 지난 12일 북한에 컴퓨터를 통해 기상관측 정보를 받아보는 자동기상 관측장비(Automatic Weather Systems) 4대를 지원 하겠다는 의사를 유엔 산하 세계기상기구에 전달했습니다.

세계기상기구는 13일 자유아시아방송(RFA)에 이번 지원의 정확한 시점과 지원대상지역은 정해지지 않은 상태이라고 전했습니다.

Here is the article translated by Google Translate.

Jospeh Bermudez recently wrote about the DPRK’s hydro meteorological service.

ORIGINAL POST: According to the Korea Times:

A meteorological expert called for international assistance for North Korea, saying it was lacking in up-to-date meteorological equipment.

The Radio Free Asia quoted Avinash Tyagi, director of the climate and water department of the World Meteorological Organization (WMO), who visited North Korea in mid-March, as saying “equipment and computers used for weather forecasting were in urgent need of replacement.”

Tyagi’s visit with two other colleagues was the first by a WMO team in eight years.

They were supposed to visit the North last November in light of severe flooding last summer, but the trip was postponed.

The floods cost many lives and left many homeless in Sinuiju near the border with China, drawing immediate international humanitarian assistance, including from the South.

The expert said new equipment would help improve the food situation in the country and encouraged the international community to help. He added of the 186 observatories scattered through the country, only 27 were connected to the international meteorology network. Even the equipment there was outdated, made in the 1970 and 80s.

Food shortages are a chronic problem for North Korea, and this has got worse in recent years, which prompted the regime to run an unprecedented campaign to call for food aid from other countries.

More on the DPRK’s 2011 food situation here.

Read the full story here:
N. Korea in need of new meteorological equipment
Korea Times
4/1/2011

Marcus Noland has crunched some numbers to some up with an approximate inflation rate for the DPRK won after it was renominated in November 2009. According to his post:

The chart above shows the trajectory of prices for rice, corn, and the US dollar since January 2010 (i.e. after the huge step-jump in real prices in December 2009 following the currency reform). A simple regression of the prices (technically their logarithmic values) against time suggests that since the beginning of 2010, inflation on an annualized basis has averaged 131 percent for rice and 138 percent for corn. The won has depreciated against the dollar at a 136 percent annualized rate. A monthly breakdown of price movements suggests that while remaining high, the rate of inflation has attenuated, declining in 2011 relative to 2010.

The co-movement of the blackmarket exchange rate and grain prices would be consistent with a small, open economy in which prices are roughly constant in hard currency terms, but are skyrocketing in terms of the rapidly depreciating domestic currency. In the extreme this could depict an economy that was effectively becoming dollarized.

He also refers to a recent report that prices have not fallen with the autumn harvest and that that the DPRK had suspended anthracite coal exports to China out of fear of domestic shortages.

In general I think the findings are plausible and I am glad that this number is finally out there for the public to reference.  I have just a couple of additional points of inquiry….

If the price and exchange rate data are from public sources, then they are probably geographically concentrated in the provinces that border China. Since there are significant barriers to arbitrage in the DPRK, I expect a large degree of regional price differentiation.  Hypothetically, what would be the effect on these findings of an increase in observations from the “southern” provinces (if that were possible)? If the data are not geographically concentrated and represent a national sample, what would we expect to see if these regressions were run for each province, and how would they compare to the aggregated findings?

A working paper in the making?

UPDATE: A comment from an individual who works with Mr. Noland:

Thanks for sharing this piece on post currency reform inflation. You raise some good points on the regionality of our pricing data. It is true that we don’t have a lot of observations from southern provinces, but it is not all northern either. We get our price data from a number of sources including, but not limited to, Daily NK Market Trends, NK Today reports, and various NGO publications. This gives us a good mixture of general country level price data as well as regional data from provinces such as Pyongyang, North & South Hamyung, North & South Pyongan, & Yanggang. Before the currency reform, we also had a good number of observation from southern areas including North Hwanghae & Gangwon.

Marcus Noland and Stephan Haggard analyzed regional price differences in a previous paper, as well as discussing other issues such as the possible tendency to increase data collection during times of distress and the possibility that organizations might cherry-pick the data that they release, all of which could affect the statistical analysis of this data.

See the paper here (PDF).

Their analysis found that regional price differences are less systematic than one might expect.

On a related note, Ask a Korean also recently translated another Korean article by Ju Song-ha which deals with food prices in the DPRK. You must read it.

Pictured above (Google Maps): Korean Central History Museum on Kim Il-sung Square–site of the new coffee house.

According to a German reader:

A report published [2011-11-24] in the German Daily “Frankfurter Rundschau” reports on the opening of a “Viennese Coffe House” right on Kim Il Sung Square inside the Museum of Korean History (the one wih the “trumpet soldier”).

In brief: Austrian enterpreneur Helmut Sachers has opened this new Vienna style cofee house in October after training Korean service- and bakery staff. It says that it mainly serves the foreign community in Pyongyang, but alo an increasing number of Koreans appear to be able to pay EUR 2, the equivalent of 5000 Won, for a cup of cappucino.

Then reference is made to two older pizza-places and a a Swiss coffe house …. and various duty free shops serving the international community and wealthy North Koreans… which is contrasted with the children and young soldiers exercising on Kim Il Sung Square, who show indications of malnurishment.

You can read a PDF of the German article here.  If a reader has the ability and inclination to provide an English-language copy of this article, I would appreciate it.