North Korean Economy Watch

The DPRK has increased its imports of Chinese fertilizers.

According to Yonhap:

According to the report by the Korea Rural Economic Institute (KREI), Pyongyang bought 29,791 tons of chemical fertilizers from its neighbor, up 3.6 fold from the 6,530 tons it imported for the same three month period in 2012.

It said for March alone, the country brought in 28,725 tons of fertilizer.

“Normally the North imports fertilizers in April,” said Kwon Tae-jin, a research fellow at KREI. He said the fact that it bought so much ahead of when it usually imports the product means Pyongyang may be interested in improving farm output.

North Korean leader Kim Jong-un had said earlier in the year that the North needs to concentrate on farming and light industries in 2013 because they directly impact the everyday lives of people.

The expert, in addition, speculated that a surge in imports could be the result of problems in local fertilizer production.

The latest findings based on data provided by Korea International Trade Association, meanwhile, showed the North importing 54,178 tons of grain from China in the first quarter, an increase of 31.6 percent from the year before.

Total imports as measured in dollars also jumped 39.2 percent on-year to US$24.71 million from $17.75 million in the first three months of last year.

Read the full story here:
N. Korea’s imports of Chinese fertilizers jump in Q1: report
Yonhap
2013-4-30

Pictured above: South Hamgyong Province

According to Radio Free Asia:

The new system has been implemented from the beginning of this year, a source in South Hamgyong province told RFA’s Korean Service.

Under the reforms, as part of agricultural liberalization in North Korea’s rigidly planned economy, farm workers may keep up to 30 percent of their unit’s produce and are allowed to sell them at market prices, sources said.

Authorities have divided up the traditional collective farms and allocated fields to smaller group units.

“The North Korean government has been dividing collective farmland up into small units since [the beginning of] 2013,” the source said, speaking on condition of anonymity.

Some workers are hopeful that the changes could help ease the impoverished country’s food shortages, but others are unsure how much they will benefit, a source from South Pyongan province said, also speaking on condition of anonymity.

“Some people are excited, expecting there will be enough rice in North Korea,” he said, adding that there was “optimism” that the system will help boost food production.

“But some are skeptical, with a strong distrust in the government which has been conducting everything unsuccessfully,” the source added.

Management structure unchanged

The move to liberalize the agriculture sector is believed to be a policy initiative of North Korea’s young leader Kim Jong Un, who took over after his father, Kim Jong Il, died in December 2011 after initiating some economic reforms that failed to take off.

No major public announcement of the new policy has been made so far.

Sources said that a key stumbling block to the farm reforms is the management structures of the collective farms which remain unchanged since the policy was implemented.

The lack of change in the leadership system leaves farm workers “uncertain” how much of that 30 percent will go into their own pockets, they said.

For example, it remains unclear whether farm managers will receive their share of harvests from the 70 percent allocated to the state or the up to 30 percent portion that goes to workers, they said.

One source in China, which is North Korea’s main diplomatic and trading partner, said the system would make little difference to workers without a guarantee on the division of profits.

“It seems like the North Korean government wants to boost the motivation to work, but there is not much difference between the previous system and the new system unless they guarantee the autonomy of workers,” he said, speaking on condition of anonymity.

Previous stories on the 6.28 economic measures here.

Read the full story here:
North Koreans ‘Skeptical’ of Collective Farm Reforms
Radio Free Asia
Joon Ho Kim
2013-4-23

According to the Wall Street Journal:

At a courtesy call on the Mongolian president last week, Pyongyang’s new ambassador made a request for food aid, according to the official website for the head of state.

“North Korea may face (a) severe food shortage,” Ambassador Hong Gyu told President Elbegdorj, according to the account. Mr. Hong then asked for Mongolia to consider the possibility of delivering food aid to North Korea, the account said.

North Korea’s toughest part of the year for food begins in April and runs through September, when the annual corn harvest begins. Kwon Tae-jin, a scholar on North Korean agriculture in Seoul said that last year’s yield was moderate, but not sufficient to tide the country over.

“We’ve learned that while rations are being delivered, it varies region by region,” said Dr. Kwon, a director at the Korea Rural Economic Institute in Seoul. “But it isn’t sufficient to go around for everyone.”

Here is some information from the web site of the president of Mongolia:

Today, the Ambassador Extraordinary and Plenipotentiary from the Democratic People’s Republic of Korea to Mongolia Hong Gyu presented a letter of Credence to the President of Mongolia Ts.Elbegdorj. The ceremony of presentation of credentials was followed by brief reception organized in honor of new envoy. At the meeting President Elbegdorj said that this year is the 65th year anniversary of diplomatic relations between Mongolia and North Korea and noted that the bilateral relationship between the two countries will further strengthen. Mr. Hong Gyu conveyed the greetings of the Supreme Leader of North Korea, Kim Jong-un and mentioned of his invitation to visit North Korea. Also, Mr. Hong Gyu noted that North Korea is committed to intensify economic reform. In response, President Elbegdorj expressed Mongolia’s interest to share its experience of economic reform.

At the meeting, both sides exchanged opinion on enhancing partnership in sport and cultural sector and discussed possibilities to bring North Korean basketball, football team and judokas to Mongolia to prepare for the international competitions.

Mr. Hong Gyu said “North Korea may face severe food shortage. Therefore, we ask Mongolia to learn possibilities of delivering food aid to North Korea”.

Read the full story here:
North Korea Asks Mongolia for Food Aid
Wall Street Journal
Jeyup S Kwaak
2013-4-22

According to the Daily NK:

Rice prices in North Korean markets have fallen dramatically after the authorities increased levels of food distribution in major urban areas like Pyongyang and Sinuiju, part of state policy of “normalizing” public distribution. Most people are undecided about the policy, but the reality is that grain has been provided by the state both last month and into this, and this is having an effect on market grain prices.

A Pyongyang source told Daily NK on the 21st, “There was five days of distribution in the first part of last month and ten days in the last part, then a further five days at the start of this month, so rice prices fell. The authorities are saying that they are going to give ten days of distribution per month until September, then normalize it completely after that.”

Ten days of distribution at North Korea’s own mandated levels means 4.5kg for workers and a further 2kg for dependent family members.

“When they first heard about [the policy of distribution normalization] they didn’t believe it, but after getting fifteen days distribution last month and another five days this, people are wondering whether this time it could be different,” the source said. “Even last month most people said ‘this will only last for this month,’ but now they have done it this month as well the number of expectant people is rising.”

The source also revealed data on the drop in market grain prices, saying that at one point the price of rice in Pyongyang had declined from 6500-7000won/kg, the approximate price point since the start of the year, to 4500won. “Although it has since climbed back up through the 5000won barrier, it is holding steady,” she added.

However, “From the middle part of April the price started slowly rising again,” she went on, conjecturing, “If distribution is achieved next month as well then it should stay below 6000won, perhaps even staying at around 4000-5000won.”

Aware that Pyongyang is a unique case in the North Korean context, Daily NK has also been checking conditions in other parts of the country, including along the Sino-North Korean border, and has learned that there has been distribution in the North Pyongan Province city of Sinuiju, the Yangkang Province city of Hyesan, and Heoiryeong and Chongjin in North Hamkyung Province, raising the possibility, which sources have echoed, that distribution is occurring nationwide. All the areas checked by Daily NK have also seen rice prices falling sharply thanks to the state distribution.

One Sinuiju-based source explained the situation there, saying, “As far as I know, the official policy of normalizing distribution is not just for our region but all other regions, too. They recently gave us ten days of rice here, so the price in the jangmadang (market) has fallen below 5000won.”

Sources report that between April 14 and 17 the price of rice has fallen to 5400won in Hyesan, 5100won in Hoiryeong, 5200won in Chongjin, and 5000won in Saebyeol County.

A source from Chongjin explained, “On or around April 10th it was selling for 4800won, but has since gone back over 5000won. They have given distribution but exchange rates are not falling, so if distribution ceases at any point, prices will have to rise again.” The same source noted, however, that in Hyesan prices fell, but when the authorities then stopped importing rice from China, they rose again, reaching 6400won. “Rumor has it that they will allow imports again,” the source noted, “but nobody knows when so prices remain high.”

Read the full story here:
Rice Prices Fall on State Distribution
Daily NK
Kim Yong Hun
2013-4-21

Institute for Far Eastern Studies (IFES)
2013-4-18

After Kim Jong Un came to power about a year ago, his main official activities reportedly were focused on the military.  The young leader is said to be looking to consolidate control over the military to strengthen the monolithic leadership system.

Recently, South Korea’s Ministry of Unification (MOU) released a report on the first anniversary of Kim Jong Un’s appointment as the first secretary of the Workers’ Party.  In the report, Kim Jong Un is reported to have made a total of 192 official activities in which 38 percent (73 activities) were focused on the military while political and economy related activities were 23 percent (45) and 20 percent (37), respectively.

Compared to Kim Jong Il’s record of 145 activities in 2011, in which military related events were 39 while economic and political and entertainment performances were 11 and 29, respectively, Kim Jong Un’s activities were focused more on the military.

In addition, a higher number of military elites were seen accompanying the state leader to these military-related events.

The report also stressed the difficulty in assuming that the North Korean economy drastically improved or deteriorated after Kim Jong Un took power.  According to FAO and WFP reports, 2012 to 2013 grain production reached 4.92 million tons, which is an increase of 10.5 percent against the previous year.

This is the third consecutive year where an increase in grain production has been reported; but North Korea still faces a deficit of 210,000 tons, as 5.43 million tons is estimated to be minimum grain requirement (according to FAO) and only 300,000 tons is expected to come in from overseas.  However, MOU authorities explain that regardless of the food supply, distribution difficulties still remain in North Korea.

The exchange rates are reported to have been continuously on the rise from last year.  As of March of this year, 1 USD exchanged for 8,000 KPW and the price of 1 kg of rice was 5,500 KPW.  Considering the average monthly salary of North Korean workers ranges between 3,000 to 4,000 KPW, the food situation for the ordinary people is suspected to still be poor.

The report also did not see any significant signs of changes in North Korean economic policy.  In North Korean leader Kim Jong Un’s New Year message, building a strong economic nation was named as the top agenda for the year, with agricultural and light industries as key sectors. However, the national budget recently released by North Korea’s Supreme People’s Assembly (SPA) revealed a decrease in the budget for agricultural and light industries while the defense budget has increased.

According to Yonhap:

According to the data compiled by the Ministry of Unification and based on information provided by foreign institutions, there were minor improvements in grain production and electricity output, but the difference was minimal and may have actually fueled inequality.

“Personally, I see almost no change from a year earlier,” said a ministry official, who did not want to be identified.

The data was released to the press to coincide with the first anniversary of the North Korean leader having assumed the country’s top job. Kim inherited the communist country after the death of his father in late 2011, but became the first secretary of the Workers’ Party of Korea on April 11 of last year.

North Korea’s food production is estimated to have increased 10.5 percent on-year to 4.92 million tons in the 2012-2013 grain year, the official said, adding that this translates into a shortage of 210,000 tons, down from 300,000 tons from the previous year.

The official, however, said foreign data is based purely on information given by Pyongyang, and is not reliable.

“There may be a need to carefully look at the data on grain,” he said, hinting at the fact that there have been numerous cases over the years where official information was not supported by facts.

On power production, the recent opening of the Huichon power station has increased output by 21.1 billion kilowatts, but the benefits are mostly being felt by the elite in Pyongyang. Outside the capital city, other regions are still affected by power shortages, he claimed.

The official added that while Kim has been calling for the bolstering of its agriculture and light industries, funds earmarked for these sectors grew at a slower pace than the overall growth of the budget.

The 2013 budget grew 5.9 percent from the year before, but funds for the light industry and farming sectors gained 5.1 percent. Defense spending on the other hand gained 16 percent on-year.

The latest data showed that consumer prices have generally been moving up since last year, potentially putting a greater burden on many people whose salaries have not changed in years, the official said.

Read the full story here:
N.K. economy remains unchanged under new leader: data
Yonhap
2013-4-12

According to Yonhap:

North Korea’s grain and fertilizer imports from China nosedived in January, Seoul’s Korea Rural Economic Institute said Sunday, citing data from the Korea International Trade Association.

North Korea imported 2,174 tons of grain and 2 tons of fertilizer from China in the first month of this year, the institute said. By product, flour imports totaled 1,172 tons and corn imports reached 540 tons.

The volume of imported grain marked a mere 9.2 percent of the North’s imports of Chinese grain in the previous month, while the corresponding figure for fertilizer amounted to 20 percent, the institute said.

Compared with the same month of last year, the figures reached 25.9 percent and 0.03 percent, respectively.

“The steep decline in the North’s grain imports from China is very unusual, even considering the past trend of grain imports decreasing every January,” said Kwon Tae-jin, a researcher at the institute.

Read the full story here:
N. Korea’s grain imports from China plunge in Jan.
Yonhap
2013-3-3

Institute for Far Eastern Studies (IFES)
2013-2-22

The number of North Korean made products is increasingly on the rise at North Korean department stores. Reportedly, 70 percent of the merchandise on the shelves in North Korea’s largest department store, Pyongyang Department Store No. 1, is North Korean made.

Japan-based pro-North Korean newspaper Choson Sinbo reported on February 13 that the bestselling item is apple juice made from the Taedong River Combined Fruit Farm, sold from the kiosk located on the first floor of Pyongyang Department Store No. 1. Sonhung Food Factory products, especially bread and confectionaries, are also said to be very popular.

The newspaper commented that the regularly held product exhibition shows at the department store have created competitive environment for local factories and companies and contributed to the production of high-quality products. They also emphasized that exhibition of products began on account of recommendations of the former North Korean leader, Kim Jong Il.

It further added, “The product exhibition invites participation from light industry factories and enterprises and its affiliated units from central and regional areas as well as department stores in Pyongyang and general stores that sell industrial products.” It commended the expos to be well received by the local people for filling the shelves with local products.

The first exhibition began in December 2010, and the second and third exhibitions were held in July 2011 and January 2012, respectively. Selling of Taedong River Combined Fruit Farm products began from the third exhibition.

In an interview with Choson Sinbo, Kim Miyoung, commerce director of Pyongyang Department Store No. 1, said the following: “Employees of the department stores and our patrons never imagined a day like this would come where our department store shelves are filled with North Korea made products, especially when we were going through the difficult economic times.”

The news also reported the opening of North Korea’s first 24-hour pharmacy. Pyongsu Pharmaceutical, a joint venture company between North Korea and Switzerland, has claimed to have opened North Korea’s first 24-hour pharmacy, called Taedongmun Pharmacy, in Pyongyang last August. Pyongsu pharmaceutical joint venture company was established from September 2004 between InterPacific Group of Switzerland and Pyongyang Pharmaceutical Factory under the Ministry of Health of the DPRK. They both produce and sell pharmaceutical products in Pyongyang. Its homepage introduces nine operating pharmacies in Pyongyang. (See Pyongsu’s website for details: www.pyongsu.com.)

The first pharmacy by Pyongsu was built near the Pyongyang’s Arch of Triumph in 2006 and expanded the number of pharmacy to nine, including the Taedongmun Pharmacy. In addition, Kangan Pharmacy was highlighted in its website, boasting that all the pharmacists working at this pharmacy are graduates of Kim Il Sung University. It also boasts that it is the first pharmacy to have been equipped with blood testing equipment.

Institute for Far Eastern studies (IFES)
2012-2-7

A year has passed since Kim Jong Un took power, yet that has not prevented instability to continue in the price of rice and foreign exchange rates in North Korea, having doubled in some cases compared to last year.

According to “North Korean Market Trends,” published by the online newspaper Daily NK, the price of rice per kg from January 2 to 9, 2013 in Pyongyang, Sinuiju, and Haesan was 6,700 KPW, 7,000 KPW, and 6,600 KPW, respectively. This was a rise of 300 KPW, 200 KPW, and 100 KPW in just two weeks.

During the same period, the foreign exchange rates in Pyongyang, Sinuiju, and Haesan also escalated to 9,100 KPW, 8,950KPW, and 8,750 KPW, a rise of 1,300 KPW, 950KPW, and 300 KPW, respectively.

This is the highest recorded price for rice and exchange rates. Last year from January 15 to 21, the price of rice in Pyongyang was 3,200 KPW and the exchange rate was 4,400 KPW. Compared to current prices, the price has more than doubled.

Prices began to escalate drastically from April 2012. Recorded highs were recorded from September 24 to 27 (at 6,800 KPW). Since then they have continued to remain high.

The Daily NK interpreted the increase in rice prices and exchange rates to be consequential of the political events that resulted in a decrease in food transactions and North Korean residents’ preference for US dollars.

Instability in rice prices and exchange rates are expected to continue as the international community adopted a new resolution to impose sanctions against North Korea in response to North Korea’s “long-range rocket launch” (December 2012) and recent announcement that it is preparing to conduct another nuclear test.

*(NKeconWatch) Another cause of the price increases is inflationary public finance in the DPRK.

According to Yonhap:

The Daily NK, a Web site run by opponents of the North Korean government which provides detailed coverage of the communist nation, claimed the price of rice, a key staple, has risen steadily over the last year.

It added that despite efforts to control prices, a kilogram of rice purchased in Pyongyang and Sinuiju from Jan. 2 through Jan. 9, rose by 300 won and 200 won, respectively, compared to just two weeks prior.

A kilogram of rice in Pyongyang cost 6,700 (North Korean) won, while in Sinuiju, just across the Amnok river from the Chinese city of Dandong, it reached 7,000 won.

The media outlet, which claims it uses a secret network of sources in the communist country, said the latest price of rice represents a more than two-fold increase from the year before, right after Kim took control of the country. In the first month of last year, a kilogram sack of rise cost 3,200 won in Pyongyang.

The North Korean leader took power following the sudden death of his father Kim Jong-il on Dec. 17, 2011.

On changes in foreign exchange rates, Daily NK said a U.S. dollar was worth around 9,100 North Korean won this month, which is a depreciation of more than 100 percent from an year earlier. In January 2011, a one dollar bill was worth just 4,400 won.

Read the full article here:
N. Korea’s rice prices, foreign exchange rates remain unstable: report
Yonhap
2012-1-31