North Korean Economy Watch

Above (UPDATED): Google Earth satellite imagery of “Food Avenue” in Hoeryong

According to the Daily NK:

A North Korean source from [Hoeryong] has reported that “Food Avenue”, a project designed to attract Chinese tourists to the city which began almost two years ago, has been completed.

According to the source, who spoke with The Daily NK on the 18th, “’Food Avenue’, below Kim Jong Suk University of Education in Nammun-dong, has just been completed, and now they are making a fuss about it as it will appear on television today. Several restaurants like Hoiryeonggak, a noodle restaurant, held opening ceremonies today, too.”

North Korea launched the construction project on orders issued by Kim Jong Il during a visit to his mother’s home town on February 24th, 2009, causing the provincial and city Party committees of North Hamkyung Province and Hoiryeong to launch a 150-day battle to complete the work between April 20th and September 16th.

However, even though workers, housewives and students were pressed into service during the period, the project was not even 50% complete by September. Although North Korea tried to attract Chinese investment, it did not work and the project finally limped to the finish line more than a year later.

The avenue starts from the front gate of Kim Jong Suk University of Education and ends in front of ‘Hoiryeong coal mining machinery factory’, a little more than a five minute walk away. Among other things, the restaurants on the street sell North Korean-style noodles, cold noodles, dog-meat soup and Chinese-style kebabs.

The authorities are hoping that by using the geographical location of Hoiryeong, on the border with the Chinese town of Sanhe, they will be able to attract tourists to Kim Jong Suk’s hometown and earn hard currency at the same time.

Needless to say, however, that while the North Korean propagandist media is busy advertising the glorious completion of Food Avenue, local citizens are looking on with disdain.

As the source put it, “I have no idea what the purpose of building this avenue is, since who on earth would come and eat here? Only a few officials from foreign currency earning enterprises who travel back and forth to China will come, so it is pathetic to even imagine that the businesses will be successful.”

“The restaurants on Food Avenue were as good as forced to open since they were assigned to individual enterprises,” he went on, before adding, “The people just ask, ‘Is there any way for businesses run by enterprises and the nation to be successful?’”

I have not seen any North Korean television this week, but if I see ground level pictures, I will post them.

Read the full story here:
Food Avenue Finally Complete in Hoiryeong
Daily NK
Yoo Gwan Hee
10-19-2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-10-11-1
10/11/2010

On October 7, Pyongyang announced that special rations would be distributed to the people of North Korea in celebration of the 65th anniversary of the establishment of the Korean Workers’ Party (October 10). Daily NK reported that an informant in North Hamgyeong Province had said, “This morning the chairman of my people’s unit went door to door announcing that on the 8th and 9th there would be food distribution for the holiday, so we could expect to get the food allocated to us from the state-run store on these two days.” When residents asked why the rations were being dispersed, the local people’s unit chairman explained that the regime was doling out “liquor and cooking oil because a decree has been handed down from above telling us to deliver [holiday rations] commemorating the Party Delegates’ Conference and the founding day of the Party.” It was also explained that the event was “twice as delightful” since the Party anniversary and the re-election as Secretary General of Kim Jong Il fell at the same time, and that since Kim Jong Un was named as the successor, the regime was seeking to create a celebratory atmosphere.

Until the 1990s, authorities provided rations along with many forms of propaganda on the birthdays of Kim Jong Il and Kim Il Sung, on New Year’s Day, the anniversary of the founding of the Party, and other significant holidays. After the ‘arduous march’ of the mid 1990s, however, it became difficult for the state to provide for the people, and the rations slowly disappeared. Holiday rations became the responsibility of local committees, so that residents of some districts would receive corn while another might receive potatoes. Outside of Pyongyang, however, it became difficult to find anyone still receiving alcohol, meat or cooking oil, with these goods reserved only for certain government workers or those in special industries.

When rations are handed out, goods and food are distributed to local stores, at which they are packaged for distribution to each household. Rations are generally distributed one to two days prior to a holiday, although sometimes not actually arriving until the holiday. On a holiday, a line can be seen in front of every state store as families gather to receive their handout.

On February 16, North Korea celebrated both Kim Jong Il’s birthday and the lunar New Year with a four-day holiday, but even then most residents received no alcohol. Soldiers and government workers above a certain level might receive one bottle of liquor and a kilogram of meat. This year, the autumn harvest festival Chuseok was advertised as a four-day celebration of the ‘biggest national holiday’, but this was mere propaganda. With many regions suffering from devastating floods, local authorities were told to handle holiday arrangements on their own.

Daily NK reported that local authorities were told to be ready to clean out their desks if they were unable to provide holiday rations, so at least cooking oil and alcohol rations were expected, but residents were still unsure how much they might receive. In previous years, people each received 100g of oil, but now they would be happy to receive even half that much. A family of four could at least expect about one bottle of liquor and half a bottle (200g) of cooking oil.

Radio Free Asia reported that at least four orders had been passed down for state-run stores and restaurants to distribute holiday rations, and that on September 30, an order was issued to provide one bottle of alcohol, 500g of oil, one kilogram of pork, toothbrushes and toothpaste, soap, laundry detergent, underwear, socks, and a pair of shoes to each household, and for state-run restaurants to provide liquor and food at state-set prices (cheaper than prices in local markets) for ten days.

According to Arirang News:

South Korea’s Unification Ministry on Wednesday finally endorsed the Inter-Korean Cooperation Fund worth 8 billion won, or roughly 7 million US dollars in an effort to help North Korea recover from the aftermath of summer floods.

The total cost of aid to be sent is about 12.2 million dollars with about 7 million donated by the Council for the Promotion of Inter-Korean Exchange and Cooperation, chaired by Unification Minister Hyun In-taek and the rest coming from Seoul’s agriculture ministry.

The money will buy 5-thousand tons of rice to be shipped on October 25th from Gunsan Port to the North Korean city of Sinuiju.

Other aid includes 10-thousand tons of cement, three million cases of cup noodles and medicine.

Read the full story here:
S. Korea Endorses US$7 Mil. Inter-Korean Cooperation Fund
Arirang News
9/30/2010

According to Yonhap:

North Korea’s rice reserves may total 1.1 million tons, which could feed the country for 110 days, a government source said Tuesday.

The source, who declined to be identified, said the estimate is based on continuous monitoring of rice stockpiles by the intelligence agencies in South Korea and the United States.

He said that while the total amount can be determined, it is hard to say if the rice is being reserved for the military or for the general population.

“Due to the nature of modern warfare it is pointless to separate if rice reserve will be used by the military or the civilian population in emergency situations,” the official said. He also declined to say if Pyongyang maintained 300 storage areas as claimed by some independent organizations.

Related to the rice reserve that North Korea may possess, an official from the National Intelligence Service (NIS) claimed in a meeting of lawmakers earlier in the day that recent remarks by Rep. Kim Moo-sung, who said Pyongyang held 1 million tons in rice reserves for the military, was not groundless.

Kim is the floor leader of the ruling Grand National Party and made the remark to point out that the North had the means to alleviate food shortages on its own to a certain extent.

The NIS official added that rice aid to North Korea must be based on clear cut strategies reflecting overall circumstances.

The Lee Myung-bak administration put the breaks on helping North Korea after a South Korean tourist was shot dead in a mountain resort in July 2008. The sinking of a South Korea Navy ship March further cooled inter-Korean relations with Seoul, making clear that it will effectively cut most exchange programs with the North.

Before 2008, Seoul regularly shipped 300,000-400,000 tons of rice to the North along with substantial amounts of fertilizers.

Read the full story here:
N. Korea’s rice reserves may total 1.1 mln tons: source
Yonhap
9/28/2010

According to Fox News:

In an eerie replay of a scandal that enveloped the United Nations Development Program, an internal audit by the U.N.’s World Food Program shows significant “lapses,” “anomalies,” and unexplained variations last year in the way the relief agency reported its financial and commodity management in North Korea.

The holes in WFP’s humanitarian reporting raise questions of whether a U.N. agency has allowed money and supplies intended for starving North Koreans to end up in the hands of the country’s brutal communist rulers, who are under international sanctions aimed at halting their aggressive atomic weapons program.

According to WFP itself, in response to questions from Fox News, the confidential audit “highlighted a small number of inconsistencies in commodity accounting that have subsequently been addressed.” All the issues involved have since been “closed,” the agency added.

However, Fox News obtained a copy of a summary of projects undertaken by WFP’s internal watchdog Office of Internal Audit between July and September of last year, which lists the North Korean lapses first among its audit highlights. Among other things, it notes:

–“inconsistent data and unreliable information systems used for reporting [WFP] commodity movements, stock balances and food utilization” in North Korea;

–“lapses…in financial and commodity management processes.”

—“numerous anomalies…in information systems used for reporting commodity movements and food utilization in the CO [WFP local country office].”

See summary document here (PDF).

The full extent of the management lapses and their consequences cannot be determined without the unexpurgated audit report—and the WFP is not willing to make that public. The agency flatly turned down a request by Fox News for the document.

In fact, WFP has not even supplied a copy of the audit report to nations, including the U.S., that supervise its operations through a 36-member executive board. (The U.S. government gave about $1.76 billion to WFP in 2009, and has so far contributed $959 million this year.)

A Fox News query to the U.S. Mission to the U.N. in Geneva got confirmation that the U.S. government did not have the report, and that “WFP does not currently share its internal audit reports with the WFP Executive Board members.”

By now, however, it was supposed to. A policy that allowed the WFP’s executive director, Josette Sheeran, to give such audit reports to executive board members on demand was up for approval by the board at its last meeting in June. However, it was withdrawn from the board’s agenda; it is now up for consideration at the next Board meeting in November.

Even then, however, the wording of a draft version of the decision underlines that the sunlight provisions “will not be applied retroactively.”

The audit references to lapses in relief aid reporting practices are not the first indicator that the regime of ailing dictator Kim Jong Il might have the opportunity to exploit WFP resources in North Korea.

In June 2009, Fox News got an admission from the relief agency that its food supplies were carried from China to North Korea on vessels owned by the Kim regime. The potential transportation costs for those relief supplies appeared to be enormously high to outside shipping experts asked by Fox News to analyze the agency’s relief program documents. No mention of the regime’s role in transporting WFP goods appeared in the documents or on the agency’s website.

Click here to read an earlier Fox News article on this topic.

WFP has delivered more than $1 billion worth of food aid to North Korea since 2000, but the amount of donated money available for that effort has dwindled sharply as the Kim regime has exploded two nuclear bombs, threatened neighboring Japan and South Korea with war, and even sunk a South Korean warship on the high seas, according to the best forensic evidence available.

Its current plans call for spending about $91 million for food for about 2.2 million North Koreans this year.

The WFP audit reference to lapsed internal controls in North Korea, and the agency’s pooh-poohing of them, also bears a disturbing resemblance to the early stages of a battle over the role of the United Nations Development Program in North Korea, which led to the closure of UNDP’s North Korea office for two years, from 2007 to 2009. The WFP was later named as the U.N.’s lead agency in the country.

In 2006, a whistleblower named Artjon Shkurtaj revealed that UNDP procedures in North Korea had funneled millions of dollars in hard currency to the Kim regime, allowed North Korean government nominees to occupy sensitive UNDP positions in the local country office, kept thousands of U.S. dollars counterfeited by North Korea without informing U.S. authorities, and other transgressions.

All were flatly denied by the U.N. agency, though many of the accusations were later revealed to have been mentioned in internal audit reports — which UNDP refused to make public, on the same grounds currently used by WFP, that they were internal management tools. The existence of the audit criticisms were only made known through an external board of auditors’ investigation in 2007.

A further outside investigation revealed that UNDP’s transgressions were even worse than the auditors had suggested. Not only had UNDP routinely continued to hand over millions in hard currency to the Kim regime, use government nominated officials in sensitive positions, and transfer sensitive equipment with potential for terrorist use or for use in creating weapons of mass destruction, it had done so in violation of U.N. Security Council sanctions in force at the time, and also contravened its own basic financial rules and regulations.

Click here to read an earlier Fox News article on this topic.

In the midst of the furor over its North Korean activities, UNDP finally agreed to make future internal audit reports public—at least to governments on its executive board, and as long as they applied in writing. Since then, it has also amended its internal procedures and is now relaunching itself in North Korea. (To date, the U.N. has not paid recompense to Shkurtaj that was mandated by its own ethics officer in the wake of the UNDP scandal.)

Is the World Food Program following the unsettling trail blazed by UNDP in North Korea, before it mended its ways?

Without the full internal audits, it is hard to tell—but the stonewalling of those audits looks very familiar.

Read the full story here:
U.N. Audit Finds ‘Lapses’ in Managing Food Program Aid to N. Korea
Fox News
George Russell
9/28/2010

You can download the PDF here.

Topics discussed include:
Kim Jong Il Praises China’s Economic Advance
“NK Keen on Investment in Mining”
DPRK Pavilion Day Marked at Shanghai Expo
NGO Initiatives in DPRK: Triangle Génération Humanitaire (France)
Choson Exchangers Train NK in Finance, Economics, Law
ROK Civic Bodies Seek to Help NK Flood Victims
Seoul’s NK Trade Ban Hits ROK Firms Hard
Can North Korea embrace Chinese-style reforms?
Pyongyang Night Life Buzzing
Hamhung Makes Economic Strides
Pomhyanggi Cosmetics Enjoy Popularity
P’yang Hosts International Film Festival
New Numerical-control Machine Tool
Climate Map to Aid Agriculture
New Rice Strain Suitable for Double Cropping
Online Medical Service Working Well
NK’s New Money-Making Venture: Video Games
Day-care Center Opens for Kaesong Complex Children
Seoul to Allow More of its Citizens to Work at Kaesong

According ot the Daily NK:

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

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

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

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

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

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

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

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

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

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

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

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

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

Click image to link to video

According to the Telegraph:

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

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

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

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

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

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

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

Pictures of the flooding can be found here.

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

According to the Daily NK:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

According to Medical News Today:

In a country where good news is scarce, a pioneering agroforestry project in the Democratic People’s Republic of Korea is restoring heavily degraded landscapes and providing much-needed food for communities living on the sloping lands.

Jianchu Xu, East-Asia Coordinator for the World Agroforestry Centre, which has been providing technical expertise and training for the project since 2008, said agroforestry – in this case the growing of trees on sloping land – is uniquely suited to DPR Korea for addressing food security and protecting the environment.

“What we have managed to achieve so far has had a dramatic impact on people’s lives and the local environment,” Jianchu explains.

“Previously malnourished communities are now producing their own trees and growing chestnut, walnut, peaches, pears and other fruits and berries as well as medicinal bushes,” Jianchu explains. “They have more food and vitamins and are earning income through trading”.

Following the collapse of the socialist bloc in 1989 and a lack of subsidies for agriculture in DPR Korea, famine and malnutrition became widespread in rural areas.

DPR Korea is a harsh mountainous country where only 16% of the land area is suitable for cultivation. In desperation in the 1990s, people turned to the marginal sloping lands but this had a price: deforestation for cropping land and fuelwood left entire landscapes denuded and depleted of nutrients.

In an effort to reverse the situation, an innovative and pioneering project began in 2002 involving the Swiss Agency for Development and Cooperation (SDC) and Korea’s Ministry of Land and Environmental Protection. The World Agroforestry Centre was later brought in to provide technical advice.

Suan County has since expanded to 65 user groups in seven counties, with several hundred hectares of sloping land now under sustainable management. And the project is still growing.

A system of establishing user groups with one representative from each family has enabled demonstration plots to be set up and a large number of households to benefit from knowledge about growing multi-purpose trees. Such trees can improve and stabilize soils as well as provide fertilizer, fodder or fruits.

Most of the people farming the sloping lands are pension workers with little agricultural experience. The agroforestry systems they are now implementing and the techniques they have learnt are significantly increasing tree cover on the slopes as well giving them a diversity of crops.

Several of the user groups have started their own nurseries so that they can be self-sufficient and produce their own planting materials.

Initially a European consultant was engaged to provide advice on sloping land management, but in 2008 SDC brought the World Agroforestry Centre’s China office into the project.

“With similar experiences and history, our Chinese staff were well-placed to work in DPR Korea,” explains Jianchu. “It was important to have people with an understanding of the technical, institutional and socio-political context.”

There are very few international organizations operating in DPR Korea, and most of these are providing emergency relief. “With our strong focus on capacity development, we have established a good reputation,” adds Jianchu. So much so that the Centre is now negotiating a memorandum of understanding with the government and there are plans to establish an office in the country.

According to Jianchu, one of the most important aspects to ensuring the project is sustained is capacity development at all levels.

“As well as the user groups, we are providing training to multi-disciplinary working groups comprising representatives from the national academy, agricultural universities, forestry research and planning institutes, and staff of the Ministry.”

“There is an enormous need to improve knowledge and skills in DPR Korea in the area of natural resource management and to nurture young scientists,” says Jianchu. SDC is now investing in this area. Each year over the past few years, a handful of students from DPR Korea have undertaken studies with the Center for Mountain Ecosystem Studies, jointly run by the World Agroforestry Centre and the Chinese Academy of Sciences and hosted by the Kunming Institute of Botany in China. Some could be considered for a doctoral program in the future.

To further support the up-skilling of DPR Korea scientists and the up-scaling of agroforestry, the Centre will soon publish an agroforestry manual. Work is also underway on an agroforestry policy for sloping lands management and an agroforestry inventory.

Read the full story here:
Agroforestry A Success In North Korea
Medical News Today
Kate Langford
8/31/2010