North Korean Economy Watch

A reporter in China feels the last year has been a good one for the DPRK (in economic terms).  I would take issue with some parts of his article (posted below), but the time I can devote to blogging is pretty slim until the end of January (field exam for school).  You are smart enough to form your own opinions in the meantime!

Here is the full article from China Daily:

Few people know that the Democratic People’s Republic of Korea (DPRK) was a relatively prosperous country in the late 1970s and 1980s. In 1979, its grain output reached 9 million tons, increasing to 10 million tons in 1984. In fact, it used to be a rice exporter during that period.

The DPRK economy started declining in the 1990s when a lot of its resources were diverted to defense and heavy industries, seriously hindering the development of agriculture and light industries. Besides, environmental destruction damaged the rich soil, making it impossible for the country to return to its past agricultural glory.

As a result, the DPRK’s economy registered negative growth in the late 1990s, and didn’t improve until 2000.

In 2009, when the international community was still worried over its second nuclear test in May, the DPRK launched economic development campaigns such as the “150-day battle”, and vowed to make the year a turning point toward economic strength and prosperity.

Let’s see the changes in the country after more than one year of the campaigns.

This year has seen many changes in the DPRK. New technologies such as computerized numerical control have been introduced to help light industries, and more cash crops grown to raise funds or exchange them with other countries for grain.

The year has seen a remarkable increase in the number of neon lamps and lights on Pyongyang’s roads and in residential buildings. Thanks to the construction of hydropower stations such as the Huichon Power Station in Chagang province and Wonsan Youth Power Station in Kangwon province, Pyongyang and Kangwon’s Wonsan city now get relatively stable electricity supply.

A drastic change in the DPRK’s economy this year is the drop in the price of rice. The DPRK government has lowered the price of rationed rice from 46 won to 24 won a kg.

In the open market, rice price dropped from 2,000 won a kg in 2009 to 1,500 won a kg in September this year. In November, it fell further to 900 won a kg in Pyongyang’s markets.

The availability of consumer goods has increased both in variety and quantity because of more and improved supply channels. Residents now rely on goods rationed by the government, as well as those available in markets and convenience stores. More special shops are selling necessities, although they cost more than in ration shops.

Contrary to some experts’ prediction, currency reform has not created a crisis or led to economic depression in the country. In 2009, the exchange rate of the yuan to the won was 1:500. This year it is 1:200, more than doubling the purchasing power of people in the DPRK.

Moreover, even though the currency reform has shrunk people’s fortunes, most of them have not suffered economic shocks.

Several facts prove that the living standards in the DPRK have improved this year. The supply of DPRK-made beer has increased, in variety and volume both, and the country may not need to import beer anymore. A bottle of rice beer costs about 600 to 700 won. More restaurants have opened in cities, and bicycles have become common in places where they were rare to find earlier.

Even the number of cell phone users has increased – to at least 80,000 – though the 200,000 to 600,000 won needed to use a mobile phone is still high and the handsets and service need to be improved.

In more sense than one, this year has a special meaning for the DPRK, not least because it chose its next generation leader. The year marks the 65th anniversary of the ruling Labor Party, too.

Though the DPRK’s claim of building an economically prosperous country in two more years may be exaggerated, we can see some obvious changes in the country. It is opening up to the rest of the world and shifting its attention from defense to people’s welfare.

But there is no denying that the DPRK now wants to develop the economy. This will become clearer if one has followed the country’s official media. During the new year’s comment, the Korean Central News Agency used the words “improving people’s lives” 16 times, a rarity earlier. Even in 2009, the words were used only once.

The DPRK tried to increase people’s income in 2002 but failed because it didn’t have enough goods then. The high inflation that followed made things worse.

Though last year’s currency reform didn’t raise people’s income directly, it has defused the currency bubble to a large extent. And this time the supply of more goods to meet rising demands has helped the country to move forward.

The currency reform, despite some negative effects, has not only improved people’s living conditions, but also built a sound financial base for the DPRK to welcome international economic cooperation in the near future.

If time and conditions allow, economic interaction could help the DPRK maintain peace in the region. The possibility of the DPRK economy suffering a 2002-like setback, however, cannot be ruled out.

Its weak agriculture and light industries are still not in a condition to support development in the long term. Plus, it has to depend on imports for 80 percent of consumer goods in the short term.

But 2010 is still a special year for the DPRK, for it is standing at a crossroads from where it can start attracting investment because capital now holds the key.

That means opportunities for China. The market for consumer goods such as light bulbs and cell phones are expanding in the DPRK, while rising demand for other products has created a larger profit space. Besides, the DPRK could open its resource markets to raise funds.

The DPRK’s economic development is good for China’s security and overall economic cooperation in the entire region. The international community should use this opportunity to help the DPRK open up to the rest of world. That would go a long way in resolving the Korean Peninsula nuclear issue than flexing of military muscles.

Read the full story here:
DPRK at economic crossroads
China Daily
Jin Meihua
12/22/2010

According to the Daily NK:

Even though some of North Korea’s farmland including much around Shinuiju was flooded this year, in other provinces food production has been greater than in previous years, according to sources.

One source from South Pyongyang Province told The Daily NK yesterday, “There have been heavy rains and rivers overflowing in some places this year, but the rice crop is better than last year’s. It seems to be thanks to imported fertilizer from China.”

The Food and Agriculture Organization (FAO) and World Food Program (WFP) also reported last month that North Korea’s grains yields had increased by 3 percent over last year, to 4.48 million tons in total.

The source explained, “In April and May this year fertilizer came just in time, so it helped with the farming. Since the situation in that period decides the number of ears of grain, if you don’t provide fertilizer production can be halved.”

Another source from Yangkang Province agreed, saying, “This year in the jangmadang in Hyesan, 50 kilos of fertilizer was selling for 220 Yuan. The price was quite expensive, but people used it even on their private fields because it was so beneficial for production.”

However, the source said angrily, “Even though farming was better than last year, the year’s distribution for farmers was a mere 30kg of rice and 50kg of corn, 20kg of rice and 30kg of corn short of last year’s distribution. So farmers complained about it but the only answer was ‘more food should go to the military’. They were lost for words.”

The source said, “The authorities keep reiterating that thanks to the Youth Captain we will live better in the future, but then give us less distribution; who would believe this? Does this not mean that the Youth Captain will also try only to feed the military?”

He added, “In the end, the vicious circle where farmers on collective farms steal rice from the farm continues. Farm cadres have already siphoned off what they want, and then farmers also do that in groups.”

The source explained, “Due to the lack of electricity and frequent machinery failures, the threshing is still going on now. Military trucks are always waiting by the threshing location, and as soon as it is done, the rice goes to military bases.”

Furthermore, he added, “Rice provided for the military is also stolen by high officials, so normal soldiers are provided only with corn.”

Previous stories about the DPRK’s food and agricultural production can be found here and here.

Stories about the UN World Food Program and FAO can be found here and here.

Read the full story here:
Higher Yields and Lower Distribution
Daily NK
Shin Joo Hyun and Kang Mi Jin
12/17/2010

Forgotten People:  The Koreans of the Sakhalin Island in 1945-1991
Download here (PDF)
Andrei Lankov
December 2010

North Korea: Migration Patterns and Prospects
Download here (PDF)
Courtland Robinson, Center for Refugee and Disaster Response, Bloomberg School of Public Health, Johns Hopkins University
August, 2010

North Korea’s 2009 Nuclear Test: Containment, Monitoring, Implications
Download here (PDF)
Jonathan Medalia, Congressional Research Service
November 24, 2010

North Korea: US Relations, Nuclear Diplomacy, and Internal Situation
Download here (PDF)
Emma Chanlett-Avery, Congressional Research Service
Mi Ae-Taylor, Congressional Research Service
November 10, 2010

‘Mostly Propaganda in Nature:’ Kim Il Sung, the Juche Ideology, and the Second Korean War
Download here (PDF)
Wilson Center NKIDP
Mitchell Lerner

Drug Trafficking from North Korea: Implications for Chinese Policy
Read here at the Brookings Institution web page
Yong-an Zhang, Visiting Fellow, Foreign Policy, Center for Northeast Asian Policy Studies
December 3, 2010

Additional DPRK-focused CRS reports can be found here.

The Wilson Center’s previous NKIDP Working Papers found here.

I also have many papers and publications on my DPRK Economic Statistics Page.

According to the Choson Ilbo:

South Korean intelligence officials breathed a sigh of relief on Sunday. They had finally located Jon Il-chun, the head of a special department in North Korea’s Workers Party that manages Kim Jong-il’s slush fund. Jon, who had eluded intelligence officials for the past six months, was finally spotted on a North Korean TV broadcast featuring one of leader Kim Jong-il’s so-called on-the-spot guidance tours in Pyongyang.

The 69-year-old Jon went to high school with Kim (68) and was appointed head of the department, known as Room 39, early this year. It manages 17 overseas branch offices and around 100 trading companies and even owns a gold mine and a bank. The US$200-300 million those companies make each year is funneled into Kim’s secret bank accounts around the world.

Room 39 is targeted each time the U.S. and other foreign governments apply financial sanctions against North Korea. Kim replaced its head early this year because the former director, Kim Tong-un, was put on an EU list of sanctioned individuals late last year, making it impossible for him to manage the leader’s secret overseas bank accounts.

Due to the importance of the department and the clandestine nature of its business, the director of Room 39 rarely appears in public, but he sometimes accompanies Kim Jong-il on guidance tours when they involve organizations linked to Kim’s slush funds, an intelligence official said.

In the TV clip on Sunday, Jon is seen with Kim on an tour to Hyangmanlu, a popular restaurant, and Sonhung food manufacturing plant. A North Korean defector who used to live in Pyongyang, said the restaurant was built in the 1990s by a wealthy ethnic Korean from Japan and is located in a busy part of Pyongyang. “It was always packed with wealthy party officials,” the defector said, adding the party manages the restaurant so the entire proceeds probably go into Kim Jong-il’s coffers. He added there is a strong possibility that the food factory also belongs to the party.

The last time Jon appeared on North Korean TV was on June 20, at the opening of a mine in Yanggang Province. A North Korean source said the Huchang Mine is a famous copper mine that had been closed for some time but must have reopened. “Judging by the fact that Jon took part in the opening ceremony, it appears to be one of many mines run by Room 39.”

Jon was also spotted at Kim’s inspections of two fisheries companies last year and one this year. A Unification Ministry official said, “North Korean exports of fisheries products are handled by the party or the military and they’re sources of revenue for Kim Jong-il’s slush fund.” Fisheries products accounted for the second largest North Korea’s W1.64 trillion exports to South Korea last year, amounting to W173 billion or 16.3 percent. Textiles totaled W477 billion or 44.8 percent.

“This is one of the reasons why we blocked imports of North Korean fisheries products” following the North’s sinking of the Navy corvette Cheonan, the official said.

Additional Information:

1. Michael Madden has written a biography of Jon Il-chun here.

2. Here is a satellite image of the Hyangmanru Restaurant.  Here is a satellite image of the Sohung Foodstuff Factory (right next door).

Read the full story here:
Elusive Manager of Kim Jong-il’s Slush Funds Pops Up Again
Choson Ilbo
12/15/2010

According to Voice of America:

Deforestation has contributed to major floods while also worsening chronic hunger problems in North Korea, but now the communist-led government is supporting a small but growing effort to recover the hillsides with fruit and nut trees.

For more than four decades after its creation in the wake of the Second World War, North Korea relied on its communist ally, the Soviet Union, to provide fertilizer for its farms. When the Soviet Union collapsed in 1989, food production in North Korea plummeted.

Environmental mess

Deputy Director Marcus Noland of the Washington-based Peterson Institute for International Economics has studied North Korea since 1995. He says as food production fell, forests in mountainous areas were cleared to grow more crops.

“And as trees were cut down on the hillsides, that contributed to soil erosion, river silting, which exacerbated the seasonal flooding problems,” says Noland. “So, the North Koreans have ended up with a real environmental mess on their hands.”

Major floods hit North Korea in 2007 and again this summer. But the environmental issues first got the government’s attention in 1995, when catastrophic floods damaged about 40 percent of the country’s rice paddies and contributed to a famine that killed an estimated two million people.

“Then the government said, ‘Okay, we need to do something,'” says Xu Jianchu, a senior scientist at the World Agroforestry Center, a global research institution.

According to Xu, different government ministries had different ideas concerning what to do about the floods. In many places, people had cut down trees to grow their own food. Xu says the agriculture ministry wanted trees back on the mountainsides and people’s crops off them.

Trees and crops together

But the environment ministry took a different view. Working with the Swiss aid agency, it started a small pilot project in 2002 to plant fruit and nut trees and medicinal bushes on the sloping hillsides, alongside people’s crops.

“We get the tree cover back, and, second, also, we do provide the needs of the local people for food,” says Jianchu.

The World Agroforestry Center joined the project in 2008. Earlier in the decade, Pyongyang had begun loosening its tight controls over the country’s food production. Xu says the government organized households into user groups which were given autonomy to choose what kinds of trees to grow. That was important, Xu says, because for one thing, the government had been offering only pine, poplar and larch trees for hillside planting – three species the farmers didn’t want really don’t want because they were not related to their food security.

The user groups were allowed to establish their own fruit-tree nurseries to expand production. With help terracing the steep hills and improving their farming practices, Xu says food production has increased, and farmers are even selling their surplus in local markets.

However, it is difficult to get an accurate picture of how much they are producing. According to Xu, people tend to say they grew less than they did because they believe the government will take away their surplus.

“They try to always under-report what they harvest because sometimes they are still afraid the government will take away if they produce too much,” he says.

A good start

While the policy remains controversial, Xu says it’s gaining support in the government. He says the best indication that the project is working is that it’s growing.

What started with just three groups is now up to about 60, covering several hundred hectares of land.

That’s a small fraction of the more than one million acres of deforested hillside being farmed, according to a report Xu co-wrote on the subject.

But it’s a good start, says the Peterson Institute’s Marcus Noland.

“I’m not sure whether the policies they’re now pursuing on these projects are the most optimal, but the idea that at least they’re trying to plant trees and reverse some of this process is a good sign.”

But Noland adds that deforestation is just one of the major food production problems North Korea faces. He says it will take a revival of the country’s overall economy to end the country’s chronic problems with hunger.

The Taedonggang Fruit Farm and Kosan Fruit Farm have received heavy attention in the DPRK media recently.  Although the North Koreans have never admitted to receiving assistance to set up all of their new fruit farms, I am willing to bet that some of these international organizations played a role.

Read the full story here:
Trees are North Korea Latest Weapons Against Hunger, Floods
Voice of America
12/14/2010

According to the Daily NK:

North Korea’s attack on Yeonpyeong Island on November 23rd has caused a spate of rice price instability in the markets. Even though it is December, rice is now selling for around 1,300 won per kilo, as much as 500 won more than it was just one month ago.

This is contra to the normal trend, which is that the price of food generally declines because farmers on collective farms get food distribution from the state at this time.

A source from North Hamkyung Province explained the details to The Daily NK yesterday, saying, “The price of rice, which was between 800 and 900 won in mid-November, started going up on around the 23rd, and is now over 1,300 won.“

“People have been taken aback by the soaring food prices,” he added

According to the source, on the 8th and 9th the rice price in Hoiryeong Market apparently hit 1,900 won, the highest this year.

This phenomenon, which is rare but not unprecedented, seems to have been caused because the North Korean authorities are trying to raise domestic and international tension on the Korean Peninsula.

An example of this can be seen in a statement released by a North Korean “social organization”, Chosun Peace Protection National Committee, on the 11th, in which it proclaimed, “Our military and the people are both prepared for either expanded skirmishes or all-out war.”

Elsewhere, people’s unit lectures over the last few weeks have focused on asserting phrases like this one, heard in a northern provincial city lecture, “Since the current situation is extremely tense, you have to live lives appropriate to that tension.”

This atmosphere naturally has spilled over into the markets, where food wholesalers and the “donju,” holders of large amounts of capital, have reacted negatively, according to the source, who explained, “The latest mood is similar to the time when the authorities declared a ‘Quasi-war Footing’ in 1993. As the atmosphere gets more serious, money holders begin to obtain and cling onto foreign currency, so foreign currency dealing and circulation volumes fall and food trade is choked off. Therefore, rice prices soar.”

In additional, military tensions between North and South are having an influence on trade between the North and China, so the amount of Yuan flowing into North Korea has also shrunk, which is another cause of rising currency exchange rates and therefore domestic rice prices.

The source said, “People are saying that this happened because of the gunfight between the North and South,” going on, “For this troubling rumor that a war could break out, smuggling volumes between North Korea and China have also shrunk.”

Although rice has now settled back to 1300 won from its high of 1900 won, the source said many people are still concerned for the winter season.

“Since the 10th, the Yuan has gone down to 330 or 340 won, so the rice price has dropped to around 1,300 won accordingly,” the source said. “But we are worried about whether or not we can afford to eat enough corn porridge this winter.”

The Daily NK has also conducted an additional investigation of currency rates and rice prices in Pyongyang, Shinuiju and Hyesan, comparing December 7th to 13th with November 24th to 30th, to check the effect of this trend across the country.

In the North Korean capital, one U.S. dollar has increased from 1,400 won to 1,750 won, while rice has gone from 750 won to 1,250 won per kilo.

In Shinuiju, meanwhile, both foreign currency exchange rates and rice prices are marginally worse again, moving from 1,450 to 1,800 won per dollar and from 800 won to 1,300 won per kilo respectively, while in Hyesan, the dollar exchange rate mirrored that in Pyongyang, but rice had been hardest hit, going from 900 won to 1,350 won.

Additionally, in Shinuiju on the 9th one Yuan had soared to 420 won, near the level of the period before the redenomination.

This December 2010 price trend is occurring for the third time since 2000. The first was in December, 2005 when the authorities stopped all food trade because the state apparently planned to resume full food distribution. Thereafter, rice prices almost doubled. The second time was in December last year, a phenomenon caused by a measure shutting down the market following the currency redenomination.

According to the Korea Times:

North Korean merchants are exchanging their local currency en masse as war jitters in the wake of Pyongyang’s attack on Yeonpyeong Island have stoked fears that the won may lose its value in the case of war, a report said.

According to North Korea Intellectuals Solidarity (NKIS), a Seoul-based NGO comprised of defectors with lines into the North, currency exchange rates have skyrocketed since the Nov. 23 incident. One hundred yuan, which before the shelling went for 2,000 won, is now worth 35,000 won, NKIS said in a report released Sunday.

“Merchants have heard rumors that if there is war, North Korean bills will become worthless scraps of paper,” NKIS quoted a source as saying, causing traders to exchange their won while they can.

Price of daily goods have also skyrocketed, the report said, with rice jumping from 900 won per kilogram to 1,600 won. Corn climbed from 4,000 won per kilogram to 6,000 won, it said.

The source said the soaring prices have been caused by jitters in the market over the heightened tensions in the wake of the Nov. 23 attack, saying the North’s military has been in a “quasi state of war” since the incident.

The rumors that the won will lose its value in case of a war have slowed market activities as merchants have raised prices and are waiting to see if further military action is on the cards.

Traders in China, from who markets in the North secure much of their goods, have also become reluctant to make transactions involving North Korean currency and are trading what won they have, the source said.

The price jump comes on the heels of reportedly enormous inflation caused by a botched currency reform last year.

The regime redenominated banknotes at a ratio of 100:1 in November last year in a move to squelch a bourgeoning private sector. But the move led to runaway inflation as the price soared by some forty times within the year, according to reports.

The U.N. estimated last month that some 5 million North Koreans will face food shortages this year due to lack of staple grains, while the economy is believed to be suffering heavily from international sanctions imposed for the regime’s missile and nuclear tests.

Meanwhile, Pyongyang, which claims Seoul instigated the shelling by firing into its territory during a military drill, continued to threaten the South over the weekend, saying, “The army and the people of the DPRK are ready for both an escalation and an all-out war.”

According to the Institute for Far Eastern Studies:

After North Korea rained artillery onto Yeonpyeong Island, military tensions have continued to grow, impacting the price of rice and the currency exchange rate in the North”s traditional markets. On December 13, NK Intellectual Solidarity reported that this has shaken the livelihoods on North Korean people. According to the group, rice has shot up 77 percent, from 900 won to 1600 won per kilogram, since the November 23 attack. The price of corn has also gone up by 50 percent, to 600 won per kilogram. At the same time, the exchange rate for Chinese yuan has risen, at least in the market in Hyeryong, from 220 to 350 won per yuan, a 59 percent increase.

Daily NK has also reported that post-Yeonpyeong food price increases have been significant, and as the Autumn harvest comes to a close in December, smaller rations to those working on collective farms is expected. A contact in North Hamgyong Province reported, “Rice prices that were 800-900 won [ per kilogram] in mid-November shot up to 1100 won and have recently risen to 1300 won…people are reeling at the sudden rise in prices.” According to the source, rice hit a high of 1900 won in the Hyeryong market around December 8-9.

The very first to reflect military tensions between the to Koreas were money handlers and wholesalers. A source in North Korea compared today”s atmosphere with that experienced in 1993, and explained that as people”s concerns about war increase, money traders become more conservative, tightening up the exchange of currency and therefore slowing the entire wholesale market, driving up prices. A survey by DailyNK from December 7-13 revealed that the exchange rate in Pyongyang rose from 1400 to 1750 won between November 24 and the end of the month, while the price of rice rose from 750 won to 1250 won per kilogram over the same period. In Sinuiji, the exchange rate rose from 1450 to 1800 won, while rice costs went up from 800 to 1300 won per kilogram. Hyesan showed similar trends, with the exchange rate rising from 1400 to 1800 won and rice rising from 900 to 1350 won per kilogram.

While food prices have fallen from their peak after the Yeonpyeong shelling, they are still high enough to cause significant difficulties for the average North Korean. Price hikes seen recently are three times as severe as those seen from 2000-2010, including the huge jump seen in 2005 when authorities attempted to reintroduce the central rationing system. Combined with last year”s failed currency reform attempt, the latest price hikes have severely strained the livelihoods of most North Koreans.

UPDATE: From the Institute for Far Eastern Studies

DPRK prices, exchange rate, skyrocket after shelling
Institute for Far Eastern Studies (IFES)
NK Brief No. 10-12-15
12/15/2010

After North Korea rained artillery onto Yeonpyeong Island, military tensions have continued to grow, impacting the price of rice and the currency exchange rate in the North”s traditional markets. On December 13, NK Intellectual Solidarity reported that this has shaken the livelihoods on North Korean people. According to the group, rice has shot up 77 percent, from 900 won to 1600 won per kilogram, since the November 23 attack. The price of corn has also gone up by 50 percent, to 600 won per kilogram. At the same time, the exchange rate for Chinese yuan has risen, at least in the market in Hyeryong, from 220 to 350 won per yuan, a 59 percent increase.

Daily NK has also reported that post-Yeonpyeong food price increases have been significant, and as the Autumn harvest comes to a close in December, smaller rations to those working on collective farms is expected. A contact in North Hamgyong Province reported, “Rice prices that were 800-900 won [ per kilogram] in mid-November shot up to 1100 won and have recently risen to 1300 won…people are reeling at the sudden rise in prices.” According to the source, rice hit a high of 1900 won in the Hyeryong market around December 8-9.

The very first to reflect military tensions between the to Koreas were money handlers and wholesalers. A source in North Korea compared today”s atmosphere with that experienced in 1993, and explained that as people”s concerns about war increase, money traders become more conservative, tightening up the exchange of currency and therefore slowing the entire wholesale market, driving up prices. A survey by DailyNK from December 7-13 revealed that the exchange rate in Pyongyang rose from 1400 to 1750 won between November 24 and the end of the month, while the price of rice rose from 750 won to 1250 won per kilogram over the same period. In Sinuiji, the exchange rate rose from 1450 to 1800 won, while rice costs went up from 800 to 1300 won per kilogram. Hyesan showed similar trends, with the exchange rate rising from 1400 to 1800 won and rice rising from 900 to 1350 won per kilogram.

While food prices have fallen from their peak after the Yeonpyeong shelling, they are still high enough to cause significant difficulties for the average North Korean. Price hikes seen recently are three times as severe as those seen from 2000-2010, including the huge jump seen in 2005 when authorities attempted to reintroduce the central rationing system. Combined with last year”s failed currency reform attempt, the latest price hikes have severely strained the livelihoods of most North Koreans.

Read the full stories here:
Tensions Driving Rice Price and Exchange Rate Hikes
Daily NK
Yoo Gwan Hee
12/14/2010

DPRK prices, exchange rate skyrocket after shelling
Institute for Far Eastern Studies (IFES)
NK Brief No. 10-12-15
12/15/2010

‘Yeonpyeong shelling causes inflation in Pyongyang’
Korea Times
Kim Young-jin
12/13/2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-12-3-2
12/3/2010

North Korean trade with China has jumped 26.7 percent during the first eight months of the year, with the bulk of its imports made up of crude oil, and its largest export being coal. Despite the increasingly severe food shortages in the North, food imports from China were actually down 7.5 percent, while on the other hand, fertilizer imports shot up by 162 percent.

The Korea Trade-Investment Promotion Agency (KOTRA) looked into the Chinese government’s import and export figures and determined that North Korean exports to China during the first eight months of the year were worth 650,000 USD, 20.6% more than during the same period last year, while DPRK imported 1.345 billion USD-worth of goods (30% increase), for trade worth a total of 1.995 billion USD, 26.7 percent more than 2009.

“Mineral fuel and mineral oil” topped the list of North Korean imports (321,000 USD), with crude oil (229,000 USD) and oil (63,000 USD) making up 90.7 percent of imported goods. However, while crude imports were 53 percent more expensive, the amount of oil imported only rose by 2.3 percent; the sharp increase in expenditure was due to climbing international oil prices. The second- and third-largest imports were listed as “nuclear reactor, boiler, and machinery” (127,000 USD) and “electromagnetic machinery, sound and video equipment” (106,000 USD). Other imports included cars and car parts, steel and steel goods, plastic and plastic goods, artificial filament, fertilizer, and grain. A KOTRA official stated that while “nuclear reactor” was listed among the goods imported by the North, there is no way to verify the Chinese statistics.

North Korea’s grain import expenditures increased by five percent, to 34,000 USD, but overall grain imports fell 7.5 percent, to 102,000 tons, due to increased costs. More specifically, rice import expenditures were up 8.4 percent to 16.6 million USD, but the amount of rice imported fell by six percent, to 38,400 tons. Corn expenditures dropped by one percent to 16.3 million USD while the amount imported fell by ten percent, to 62,000 tons. The cost of barley imports grew 190 percent, to 353,000 USD, with the amount of barley brought into the country up 89 percent to 1,011 tons. 277,000 tons of fertilizer were imported, 162 percent more than last year, at a cost of 40 million USD, 85 percent more than 2009. Almost all of the fertilizer was nitrogenous.

North Korea’s exports to China were made up largely of mining and fisheries. Coal topped the list (191,000 USD), although the amount sent across the border was 31 percent less than last year. Iron ore was second, and was not only down by 34 percent, it brought in 134 percent less than 2009, as it was worth only 111 million USD. Textiles and accessories worth 81 million USD, steel worth 64 million USD, and mollusks worth 32 million USD were also sent to China.

According ot the Korea Herald:

The price of rice in North Korea has soared nearly 40-fold in the year after the country’s botched currency reform.

Rice is now traded at around 900 North Korean won per kilogram in Pyongyang’s markets, according to online media outlet Daily NK. This is up 3,990 percent from 22 won late November last year in the newly introduced currency.

The North knocked two zeros off the face value of its old currency on Nov. 30 last year, exchanging 100-won bills for new 1-won notes. Therefore the price of a kilogram of rice, which was 2,200 won in the old currency, was redenominated to 22 won.

Under the currency reform plan, a 100-won note in the new currency should have the exchangeable value of a 10,000-won bill in the old currency. However, due to 4,000 percent inflation, the new 100-won note is now only worth 250 won in the old currency.

The price of rice in North Korea is deemed the benchmark of all prices in commercial trade.

“The apparent purpose of the North Korean currency reform was to reduce the amount of money in the markets to stabilize prices, but it failed to achieve this due to an absolute lack of commodity supplies,” said Cho Myung-chul, a senior fellow at the Korea Institute for International Economic Policy.

“The fact that rice prices jumped 4,000 percent based on the currency’s exchangeable value shows that the effect of the 100-fold revaluation has mostly disappeared.”

After major markets in the reclusive state were shut down in mid-January this year, rice prices in Pyongyang soared, hitting 1,300 won per kilo in early March. They dropped to the 400-won range in May as markets began to function again, but soared over the 1,000-won mark in August due to an exchange rate hike and damage caused by heavy rains.

When the North redenominated its currency, it placed a cap on the amount of money that could be converted per person, telling people to deposit the rest in state-run banks.

The measure, which was aimed at crippling the growing merchant class and reasserting control over market activities, tightened the distribution of food and stirred anti-regime sentiment.

This Daily NK story asserts that the average salary of a general worker is around 1,500 won a month, and it is not paid regularly.

Read the full story here:
N.K. rice price soars nearly 40-fold in a year
Korea Herald
Kim So-hyun
11/20/2010

Acording to Reuters:

North Korea is facing a grain deficit of 542,000 tonnes in the 2010/11 marketing year after the government only partially provided for grain import cover, the United Nations’ food agencies said on Tuesday.

North Korea’s cereal import requirement in 2010/11 is estimated at 867,000 tonnes, while the government plans to import commercially only about 325,000 tonnes, the Food and Agriculture Organisation and the World Food Programme said .

“The mission recommended to provide some 305,000 tonnes of international food assistance to the most vulnerable population,” the FAO and WFP said in a report after a joint mission to the country.

According to the New York Times:

Despite a relatively good autumn harvest in North Korea, the reclusive communist nation remains in dire need of food aid, especially for its youngest children, pregnant women and the elderly, according to two United Nations agencies.

In a new joint report, the World Food Program and the Food and Agriculture Organization said that North Korea, even after substantial imports, would have a shortfall in staple crops — mostly rice, grains and soybeans — of more than half a million tons.

The 2010 harvest was 3 percent higher than last year, the agencies said, despite an unusually harsh winter and alternating drought and flood conditions over the summer.

But even in the best of years North Korea is unable to feed itself. Government food distribution provides only half the necessary daily calories, the report said. People are thus left to fend for themselves with small hillside plots, kitchen gardens and the buying of or bartering for food on the black market.

Aid officials have estimated that the food aid program for North Korea was 80 percent underfunded and that nearly half the country’s children are malnourished.

“I saw a lot of children already losing the battle against malnutrition,” said Josette Sheeran, executive director of the World Food Program, after a visit to North Korea earlier this month.

“Their bodies and minds are stunted, and so we really feel the need there,” she said. , Agriculture is “the main contributor to the national income” in the North, the agencies said, although its percentage of gross domestic product has declined in the past decade to 21 percent from 30 percent. A lack of foreign currency and credit, made worse by international sanctions against the regime, prevented significant imports of fertilizer and pesticides as well as tires and spare parts for farm trucks and tractors.

In remarks before the Group of 20 summit meeting in Seoul last week, U.N. Secretary General Ban Ki-moon said he had “very serious concerns about the humanitarian situation” in North Korea, “especially for the very young children.”

Mr. Ban said the South Korean president, Lee Myung-bak, had pledged to him that the South would provide humanitarian assistance to the North’s children.

…

The two U.N. agencies said their report, which was released Tuesday, was produced by teams that went to most of North Korea’s principal agricultural regions.

As the teams traveled around, the report said, “it was evident that there were no cereals in stock in the warehouses visited.”

…

Additional Information:
1. Here is a link to stories about South Korean aid provided this year. 

2. The DPRK has recently expressed skepticism over the motivations of foreign aid agencies.

3. Here is a PDF of the UN Special Report.  It is full of data and has been added to my Economic Statistics Page.

4. Here is a link to the UN report which you can read on line.

Read the full sotries here:
N.Korea faces 542,000 t grain deficit in 2010/11-UN
Reuters
11/16/2010

U.N. Urges Food Aid for North Korea
New York Times
Mark McDonald and Kevin Drew
11/17/2010

Click image to see all the prices

According to the Daily NK:

Winter is a tough time for average North Koreans, with a number of demanding economic issues to deal with. This year, as the traditional season for making “kimchi”, the indispensible side dish on any Korean dining table, approaches, ingredient prices in the market are become a focus for concern.

This is only the second winter since the currency redenomination of November 30th, 2009. Since then, prices have fluctuated unpredictably throughout the year due to various economic and political uncertainties. As a result, the overall situation now is not radically different from the period of high prices before the redenomination.

According to one inside source from North Hamkyung Province who spoke with The Daily NK on November 9th, “Wealthy people will have already finished preparations for heating and kimchi by the end of October; however, those belonging to underprivileged groups have not even prepared the kimchi for winter yet.”

According to the source, Chinese cabbage, the core constituent of the most popular form of kimchi, was being sold for as much as 100 won/kg and white radish for 60 won/kg in the market in Hoiryeong in North Hamkyung Province in recent days. The core seasonings for many forms of kimchi, garlic and dried red chili pepper powder, were being sold for 3,800 and 4000 won/kg respectively.

On October 25th, 2009, shortly before the currency redenomination, Chinese cabbage was being sold for 200 won, white radish for 150 won, garlic for 3,000 won and dried red pepper powder for 7,000 won in the same market. Thus, many of the effects of the currency redenomination appear to have been disguised by price inflation.

For a family of four, 500kg of Chinese cabbage and 300kg of white radish is needed to see them through the winter. To meet that requirement in full would, at current prices, require 50,000 won for cabbage and 18,000 won for white radish. Add in the price of the seasonings, including salt and green onion in addition to garlic and red pepper powder, and the total price is close to 100,000 won.

Other aspects of winter life are no less problematic. Heating is one example. For a household burning coal, a couple of tons are burnt between November and March. Currently, the price of coal in Hoiryeong market is around 20,000 won per ton. Meanwhile, houses which are heated with wood need roughly enough to fill two ‘Seungli-58’ trucks, or approximately five tons. Such a quantity costs 50,000~60,000 won (7,000 won/cart in Hoiryeong) at the current market price.

Another key factor in a comfortable winter is vinyl for shielding houses against the winter wind. This is now selling for 400 won/m. Most North Korean houses have three windows, to which people living in North Hamkyung and Yangkang Province apply two layers of vinyl, meaning that each household needs ten meters on average, including that to cover the door.

Therefore, taking Hoiryeong market as the average, people need a minimum of 150,000 won to prepare for the winter. When the average North Korean worker’s salary is between 1,500~3,000 won, it is clearly very hard for most to endure the winter in comfort.

According to the source, “The conditions in a household are revealed by the amount of dried red pepper powder in their winter kimchi. An affluent family’s kimchi is red and appetizing, but an poor family’s kimchi is like white kimchi with a few pieces of dried red pepper powder on the top.”

Read the full story here:
The Chilly Economic Wind of Winter
Daily NK
Yoo Gwan Hee
11/10/2010