North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-08-31-1
8/31/2010

An organization representing several major South Korean religious organizations crossed the DMZ on August 27 to deliver over 300 tons (thirteen 25-ton trucks) of flour to the city of Kaesong, with plans to distribute the aid to North Korea’s children and poverty-stricken. This is the first overland delivery of aid since Seoul’s May 24 measures restricting exchanges in response to the Cheonan incident.

Nine members of the organization, representing Buddhism, Catholicism, and Protestantism, travelled to the North. The group intends to visit one or two nurseries, and distribute flour to Kaesong City as well as Jangpung, Keumchon, Daechon, Chongdan and Yondan districts. The delegation is also delivering six boxes of nutrition supplements for children in Kaesong’s nurseries. Before crossing over into North Korea, the group held a press conference in Paju City’s Imjin Park. At the conference, a representative stated that while the aid shipment was later than desired, the organization thanked the South Korean government for making the decision to allow the delivery while facing a difficult situation in the aftermath of the Cheonan incident.

The organization also stated, “Peninsular denuclearization is also important for bringing peace and security to the Korean Peninsula,” but it is necessary to make ensuring the lives of those in both North and South Korea a top priority, and the group “earnestly hopes that the [South Korean] governments’ active support of humanitarian assistance can save the lives of North Korean residents and help to realize inter-Korean reconciliation and peace.”

The organization also stressed that religious teachings emphasized the need to exert all efforts for the desolate and the starving. The group is devoted to helping resolve the North Korean plight caused by starvation and malnutrition, and through these efforts, bringing about peace on the Korean peninsula. The organization, representing those of Jewish, Catholic, Buddhist, Protestant, Korean Buddhist, and Chongdo religions, as well as the United Religions Initiative of Korea, continues to pursue renewed government assistance to North Korea.

The Korean Conference of Religion and Peace (KCRP) issued a statement on August 27 declaring that the South Korean government needed to send aid to the North not only in response to the critical situation caused by recent flooding, but in order to help resolve the chronic food shortages causing ongoing hardship for the people of North Korea. In highlighting the plight of North Koreans, the group emphasizes familial and national ties, stressing Korean unity in calling for government assistance for ‘brethren’ in the North. The group also calls for both Seoul and Pyongyang to “open [their] hearts and hold talks on peninsular peace and unification” rather than continue with the current confrontational policies.

According to the AFP (h/t NKnews.org):

North Korea will receive emergency aid from China amid reports that the impoverished country’s food crisis would worsen this year.

China has decided to provide an unspecified amount of “emergency relief materials” to North Korea, its official Korean Central News Agency (KCNA) said late today.

“This measure will encourage the Korean people in their efforts to recover from the flood damage as early as possible and more energetically step up the building of a thriving nation,” it said.

The report followed a message of sympathy from China’s president Hu Jintao to North Korean leader Kim Jong-Il.

In the message, quoted by KCNA, Hu expressed deep sympathy and consolation over “the sad news that some parts of your country were hit by severe flood recently, causing causalities and property losses”.

The North has reported widespread flooding this summer which washed away homes, roads, railways and farmland, causing an unspecified number of deaths.

Heavy downpours last week swelled the Yalu river, which forms part of the border between China and North Korea, sending water spilling over its banks on both sides and inundating homes, roads and farmland.

After decades of deforestation, the North is particularly vulnerable to flooding. In 2007, it reported at least 600 people dead or missing from devastating floods.

Aid groups warned that this year’s flooding would aggravate the North’s chronic food shortages.

The North suffered a famine in the mid-1990s which killed hundreds of thousands. The UN children’s fund estimates one third of children are stunted by malnutrition.

A bungled currency revaluation last November, designed to flush out entrepreneurs’ savings, backfired disastrously, fuelling food shortages and sparking rare outbreaks of unrest.

In 2008 South Korea suspended an annual rice shipment to its impoverished neighbour as relations soured.

For its part, South Korea has also offered to send assistance.  According to Yonhap:

South Korea’s Red Cross on Thursday proposed providing aid to North Korea to help the communist neighbor recover from recent flood damages, an official said.

The proposal was made in a message delivered to a inter-Korean office in the North Korean border town of Kaesong, a Unification Ministry official in Seoul said, declining to be identified.

The ministry said earlier in the day that it was considering allowing emergency relief assistance to North Korea, but did not elaborate. The North, which remains technically at war with the South, had to evacuate a large number of people when heavy rains raised the level of rivers on its border with China and flooded its towns earlier this month.

“It’s not just the people in the Sinuiju border area that we’re considering providing aid to,” a Red Cross official said by phone, declining to be named. “We will follow the examples of 2006 and 2007 when we provided help, but the scale of aid this year will be determined upon exact assessments.”

“The emergency aid will mainly consist of noodles, water, milk and the likes,” the ministry official said, ruling rice out.

The aid, if accepted, could open room for improvement in the inter-Korean relations, which have soured since South Korea blamed North Korea in May for the sinking of its warship. Pyongyang denies involvement in the sinking that killed 46 sailors.

Read the full stories here:
North Korea to receive aid from China
AFP
8/26/2010

S. Korea’s Red Cross proposes sending flood aid to N. Korea
Yonhap
Sam Kim
8/26/2010

According toYonhap:

The World Food Program is struggling to keep its project of feeding malnourished children in North Korea from shrinking, its director for the communist state said in an interview on Thursday.

Torben Due, who represents the WFP office in Pyongyang, said his organization set out to raise US$500 million two years ago to provide basic nutrition for North Korean children.

In reality, what the WFP ended up with was $100 million. Due said his team in Pyongyang has re-designed its operation for the next two years to value at $96 million because of grim expectations for funding.

“The most difficult obstacle is that we don’t get the resources we need. We don’t get the money we need,” said Due, who was in Seoul this week to meet with government officials to discuss food needs in North Korea.

“We had to reduce (our program) because we could see we would not get the money. We had to design a program small and realistic in terms of what we would be able to do,” he said.

The WFP is a U.N. organization heavily dependent on donation. In North Korea, it supplies cereal-type food mixed with soybeans, milk powder, sugar and others rich in protein and minerals, specifically aimed to fight nutritional deficiencies in growing children.

“The child who is chronically malnourished will be damaged in a way that lasts a whole life. He will be physically stunted, and mental and intellectual development will also be harmed,” Due said, adding North Korean children “particularly” like biscuits.

Due said political tensions appear to be one reason why the WFP operation is not receiving enough donations for North Korea, which has conducted two nuclear tests since 2006, defying warnings.

“This is a pure humanitarian issue. Children suffer more than anybody else if there is no food,” he said, adding that the WFP office in Pyongyang had to cut the number of counties it was supporting from 130 to 65 this year.

“You are talking about roughly a third of the population that has problems with insufficient food intake, both in terms of quantity and quality. What we’re providing is supplement for a small part of the population. The problem is much bigger than what the WFP program is about,” he said.

North Korea has a population of about 24 million. Due said quantity matters as much as quality when it comes to helping North Korean children.

“If you have a country with 5 million children, if you want to contribute and solve the problem, you must think in terms of what is needed,” he said.

Due declined to disclose his discussions with the South Korean government officials he met here. South Korea has suspended sending large-scale food aid to North Korea unless Pyongyang moves to denuclearize under a multinational agreement.

North Korea has relied on international handouts since it suffered massive famine in the 1990s, when as many as 2 million people reportedly died.

The country is vulnerable to natural disasters. Earlier this month, heavy rains along its border with China raised the level of rivers and led to the evacuation of 23,000 North Koreans, Due said.

“In the areas affected, it’s quite devastating,” he said. But Due said North Korea had yet to appeal for international assistance as “the impact is very limited” and “localized.”

“The government can probably handle it themselves. We are, along with the Red Cross, providing some items,” including 1,300 tons of food, he said, adding he had no knowledge of human losses yet.

Earlier Thursday, South Korea’s Red Cross proposed sending aid to North Korea to help it recover from the flooding.

Read the full story here:
WFP feeding fewer N. Korean children as donation shrinks: director
Yonhap
Sam Kim
8/26/2010

Institutie for Far Eastern Studies (IFES)
NK Brief No. 10-08-25-1
8/25/2010

The quality of life among North Korea’s agricultural workers has reportedly worsened sharply in recent times. It appears that the aftermath of last November’s currency reform measure has finally reached as far as the farmhouse. According to a report by the group Daily NK, in the town of Onsong, North Hamgyong Province, only 4~5 families per neighborhood unit (around 30 families) manage to eat rice, in the way of ‘corn rice’, three times per day. Most households eat boiled ears of corn or gruel-like corn soup.

While it was thought that the currency reforms would ease the food shortages of farming households, their lives have grown more difficult due to the sudden fluctuations of market prices, driving down the number of farmers able to sell their yields at market. In the Onsong market, rice sold for an average of 1050 won per kilogram on August 20. Compared to the beginning of the month, prices were down approximately 100 won, but are still more than twice as high as just a few months ago. This is, in part, due to the foreign currency exchange rate. One Chinese Yuan is trading for 215 North Korean won.

Actually, North Korean farmers were about the only beneficiaries of the currency reform. Last December saw the biggest public distribution of goods ever. Commerce was up around 15~20 percent over the year prior. In addition, follow-up measures allowed families to collect 10,000-20,000 won each. However, as market prices became increasingly unstable during the first half of this year, it became harder for farmers to sell their goods. Because rice prices would double or triple, then drop again, month after month, it was difficult for a farmer to take 20~30 kilograms of corn to market and get the price they wanted. On top of this, the price of household goods was climbing, driving up the cost of living.

In North Korea, all farmers are obligated to work on cooperative farms, but are also allowed private plots to raise goods for supplementary income. Therefore, when they have an opportunity, most make their way to a local market to sell their goods. The regime considers this ‘supplementary’ income, but actually, the money earned from this practice is what most live off of, using profits from their corn sales to buy other food or necessities. For these farmers, not only is it difficult to sell their crops, but circumstances make it tough even to harvest them. In the case of one farmer in Onsong who works a 1500 pyong private plot, he harvests approximately three tons of corn per year. As those at the cooperative farm receive only 300 kilograms of corn in rations, three tons is not an insignificant amount. However, due to the cost of fertilizer, bribes to authorities, bribes to inspectors, etc., he is left with only around one ton. With fertilizer shortages this spring, considerably less fertilizer was available for private plots.

Even if the farmer saw yields similar to last fall, at today’s prices, he would be able to make only around 500,000 won. This is little more than the 40,000 won/month market traders can make. Farmers with plots of only 500~600 pyong have an even more difficult time. A source explained, “As stories of growing starvation in Kangwon Province spread, people are becoming more distraught,” and, “a family of four lives off of gruel made from one kilogram of potatoes or corn per day.”

North Korea has been hit with some serious flooding this year.  First came this report from August 5. Now KCTV and Xinhua are broadcasting footage of the flooded Yalu/Amnok River.

According to KCNA:

Planes of the air force and warships of the navy of the Korean People’s Army rushed to the area of Sinuiju, North Phyongan Province, hit by sudden torrential rain and successfully conducted an emergency operation on August 21 to rescue the inhabitants who were at the crossroads of life and death.

Unprecedented downpour hit the northeastern area of China on August 19 and 20, causing flooding in rivers. This also adversely affected the northwestern area of Korea.

5,300 cubic meters of water rushed into the River Amnok per second from a river of China, causing the water level of the river to rise suddenly from 0:00 on August 21. As a result, the river swelled in a minute, leaving even Sinuiju City inundated. This paralyzed traffic and did damage to many objects.

Hardest hit by flooding were Sangdan-ri, Hadan-ri, Taji-ri, Soho-ri in Uiju County, Ojok Islet and Maksa Islet in Sinuiju City. They were completely submerged and single-story houses went under water.

The flood victims were at a loss on the roof tops of buildings and hills.

The institutions concerned took emergency measures to rescue the victims but the damage was so serious that they proved unsuccessful. Upon hearing this, General Secretary Kim Jong Il ordered KPA units to immediately launch rescue operations.

Air force units sent dozens of planes and navy units warships and various types of means and succeeded in evacuating at least 5,150 flood victims to safe areas in close touch with officials of party and power organs and people’s security organs in the flood-hit areas.

The inhabitants in the flood-ravaged areas and servicepersons who were mobilized for the rescue operations noted in excited tone that the socialist system in the DPRK is the most advantageous and benevolent one as the life and properties of people are protected by servicepersons and Kim Jong Il is the greatest father as he provided this land of bliss for the people.

And according to the Daily NK:

Faced with rising waters in the Yalu River, the North Korean authorities issued an evacuation warning at around 8 P.M. on the 20th, but most residents did not place much faith in it and stayed at home, so the number of flood victims increased when the river burst its banks at dawn on the 21st, according to a Daily NK source.

The source explained on the 22nd, “At 3 A.M. yesterday, downtown Shinuiju started flooding and houses got submerged. The day before yesterday at around 8 P.M. the authorities released a broadcast telling people to evacuate to South Shinuiju, but the majority of residents ignored it.”

He went on, “In Majeon-dong, since the sound of water was so loud at dawn, only then did people evacuate their places to an elementary school in the neighborhood which was on higher ground. Some of them could not leave, so presumably there were victims.”

He added, “I heard there might be deaths, although there has been no official report yet.”

If people also ignored the evacuation warning in other regions, there is a high possibility that damage in Sangdan-ri, Hadan-ri and Daji-ri in Shinuiju, places in which Chosun Central TV reported 100 percent of houses and farms had been flooded, might have been much more significant than in Majeon-dong.

The source explained the reason why people did not listen to the warning, “Since the middle of this month there have been a few warnings, but nothing serious happened. Therefore, people did that.”

“Cadres living in apartments were busy carrying their stuff to upper floors, but those who don’t have any property have nothing to damage, so it can’t have been that. There might have been some who stayed at home in order to keep a few domestic animals or a small amount of land,” he added.

Chosun Central News Agency (KCNA) reported on Saturday, “From 12 A.M. to 9 A.M. on the 21st, due to more than 300 mm of heavy rain falling around the Supung Dam, 100 percent of houses, official buildings and farms on the Yalu River were flooded and Sangdan-, Hadan-, Daji-ri in Shinuiju and Seoho- and Eojeok-ri in Uiju were also flooded.”

Meanwhile, another source has reported to The Daily NK that while airplanes and helicopters were rescuing trapped people, one helicopter crashed, killing the crew.

The source explained, “The helicopter was approaching Sangdan-ri alongside the Yalu River in order to rescue isolated residents, but it crashed into a rice paddy. The two pilots died.”

Although Chosun Central TV reported the fact that helicopters had been sent to the rescue project on the orders of Kim Jong Il, there was no word of the crash.

According to the source, people rescued by other helicopters were sent to Dongrim, North Pyongan Province.

The KCNA reported that some 5,000 residents were evacuated to high ground.

The clean-up has been underway since the 22nd, and will continue for three days. Shinuiju residents are taking part.

(h/t CanKor)  According tot he Concern Worldwide web page, they are engaged in the following projects in the DPRK:

Sanitation
Concern has recently begun work on an EU-funded programme in Phyongan province.

This work is focusing on sanitation and waste disposal in Hoichang town. We’re building water systems and improving sewage treatment systems and latrines in the area.

Over 55,000 people will benefit from this work.

Nutrition
Another EU-funded Concern programme is focusing on nutrition. We are aiming to increase sustainable food production in Hoichang and Koksan, and in two neighbouring cooperative farms. 

To do this, we are establishing urban greenhouses, irrigation systems and goat milk processing facilities. We are also working with locals to increase their technical and management skills.

This programme will benefit over 43,000 people.

Water works
An important part of our work is focused on water, sanitation and hygiene promotion.

Between 2004 and 2009, Concern provided 252,500 people in the country with clean drinking water. We did this by renovating pump stations and providing household connections. Key innovations have included gravity-fed water systems and the use of solar powered water pumping systems.
 
In addition, 46,800 people have benefitted from improved sanitation facilities, especially in institutions such as schools, kindergartens, nurseries and the county hospital.

Forestry
In the rural communities where we work, our focus has been on halting deforestation and improving farming techniques.

We have provided 270,000 potted tree seedlings to three community-run nurseries. These potted seedlings grow quickly – in three to nine months – with undamaged root systems.

This is a major improvement on the more traditional bed-grown seedlings that were previously used. Traditional seedlings usually take one to three years to grow and often suffer from damaged roots.

As a result of the success of the potted seedlings, the Ministry of Lands and Environmental Protection is now keen to extend their use countrywide.

As part of our forestry work, we have also supplied nurseries with tools, pots and fuel.

Improving crops
With supervision from the Academy of Agricultural Research, we undertook a series of crop trials. We wanted to find out what types of crops could flourish on the lower slopes of hills and mountains.

The crops included new varieties of rice, sweet potato, sorghum, soya bean, millet, hybrid maize and ground nuts.

The trials were successful. There were positive results: the hybrid maize produced twice the normal yield; the millet produced standard yields using only half the normal amount of fertiliser. These crops are now being incorporated into the annual co-operative crop plans.

The ability to grow these crops on lower slopes will alleviate the pressure to produce crops on the higher steeper slopes.

Food production
Another EU-funded project aims at improving food production for people living on sloping land.

As part of this project, we are introducing conservation agriculture, which will increase yields, reduce soil erosion and reduce labour requirements to produce food.

We are also improving crop storage to reduce the post-harvest losses, and conducting crop trials for improved varieties of maize, winter wheat, soya bean, upland rice and potatoes.

According to the Daily NK:

Trade between North Korea and China for the first half of 2010 was $1.29 billion, a 16.8% increase over the corresponding period of last year.

Using Chinese customs statistics, the South Korean embassy in China revealed the details of Sino-North Korean trade on Monday. According to the statistics, North Korean exports to China fell by 1.1% in the same period to $350 million, while imports from China increased by 25.2% to $940 million.

As a result, North Korea’s trade deficit with China was $590 million, a 48.5% increase over the previous year.

According to the statistics, North Korea imported 140,000 tons of food, 300,000 tons of oil and 100,000 tons of fertilizer during the period. Notably, flour imports rose by 383%.

Reduced inter-Korean trade and other economic exchanges following the Cheonan sinking and reduced international humanitarian aid due to UN sanctions were two of the most significant causes of the burgeoning reliance upon China.

Read the full story here:
Sino-North Korean Trade Deficit Rises
Daily NK
8/16/2010

According to the Joong Ang Daily:

North Korea has added corn and rice to the list of items to be monitored for price hikes at markets in Pyongyang, a South Korean official said yesterday, suggesting that food staples are increasingly traded privately in the capital as its rationing system falters.

A Unification Ministry official, who spoke on the condition of anonymity due to the information’s classified nature, said North Korean authorities recently introduced price caps on the two staples at markets in Pyongyang.

“The regime appears to be increasingly allowing markets to take over the role its rationing system once played,” the official said, adding that the two items were not on the monitor list when his ministry obtained a copy of the document in February.

North Korea allows a limited number of markets to operate independently under strict rules. The country apparently cracked down on its growing merchant class when it conducted a sweeping currency reform last year.

…

In a related development, a Unification Ministry report said earlier this week that the price of farm products such as beans, chicken, corn and rice shot up two to three times from February to July.

The report said the increases can also be attributed to the appreciation of the Chinese yuan. Because North Korea imports many of its products from China, the rise of the yuan’s value can also affect the purchasing power of North Korea.

Read the full story here:
North eases trade rules on corn, rice
Joong Ang Daily
8/5/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-08-06-1
8/6/2010

Over the last five months, regular food rations have not been provided even to those in the capital city of Pyongyang, indicating the severity of food shortages in North Korea. According to the ROK Ministry of Unification, rice and corn were added to the list of goods with controlled prices in at least one market in Pyongyang. A list of controlled goods with state-set upper price limits has been distributed to each market throughout North Korea since 2003. While prices may vary slightly, comparing them with earlier price caps gives a good indication of the availability of goods.

The July appearance of rice and corn on the list of restricted goods, neither of which has been on the list even as far back as February, when strict market controls were enacted in the aftermath of failed currency reform measures, indicates that the ration system is not operating normally, even in Pyongyang. It also means that not only are officials not receiving normal rations, but that average residents are relying more on markets for their food. One Unification Ministry official stated, “Rice was on the list of controlled goods in markets outside of Pyongyang in February, but couldn’t be found in markets in the capital city…in July, rice and corn emerged [as items with price caps] in Pyongyang markets.” The official also explained that as the food ration system collapsed even in Pyongyang, the issuance of price caps on rice and corn was an indication that more people were turning to the markets to buy these staples.

Looking at other goods on the list, it appears that agricultural goods cost 3~7 times more in July than in February, and manufactured goods were as much as 7 times more expensive. Necessary goods, both agricultural and manufactured, have grown considerably more expensive in North Korea over just five months. More specifically, beans were up 3.6-fold; chicken, 3.3-fold; lettuce, 3-fold; apples, 6.3-fold; rice and corn, 2-fold. Ball-point pens and other daily-use items were up 5~6-fold. In July, rice sold for 550 won per kilogram, while corn was priced at 280 won per kilo.

The price caps are upper limits set by North Korean authorities, but the reality is that goods are often sold at higher prices. The shortage of agricultural goods, and the fact that the Chinese Yuan has appreciated 3-fold since February, has led to these record price-hikes. On May 26, Workers’ Party of Korea (WPK) authorities issued a decree, “Regarding Korea’s Current Food Situation,” calling for residents to fend for themselves. As prices skyrocketed on agricultural goods, one measure adopted by North Korean authorities has been to more than double exports of iron ore from Musan, North Hamgyong Province to China, while drastically increasing the import of corn. This increased import of corn has brought down the price of rice from 1,200 to 900 won per kilogram in Musan, while corn itself has fallen from 600 to 500 won. On the other hand, the drop in the foreign currency exchange rate in mid-July caused a shortage of dollars, driving the price of rice up to as high as 1,200 won per kilogram in some regions.

UPDATE: According to the Associated Press (8/5/2010):

Flooding last month caused serious damage in North Korea, destroying homes, farms, roads and buildings and hurting the economy, state media said Thursday.

About 36,700 acres (14,850 hectares) of farmland was submerged and 5,500 homes and 350 public buildings and facilities were destroyed or flooded, the official Korean Central News Agency said.

“Not a small number of industrial establishments were damaged or flooded, inflicting an adverse effect on the economic growth and the people’s living,” the report said.

Landslides caused by the torrential rains wrecked bridges and roads and caused a power equipment failure that disrupted railroad traffic in some parts of the country, KCNA said.

“Active efforts have been made to heal the flood damage in the affected areas,” the report said without elaboration.

KCNA reported casualties in Jagang and South Hamgyong provinces but did not say how many, nor if people were injured or had died.

The news agency had previously reported heavy rains fell in the country in mid- to late July, but those earlier reports did not mention flooding or damage. State media in the impoverished, reclusive nation often report news days or weeks after an event takes place.

There was no indication the North would need outside help to deal with the flooding.

In 2007, the regime did seek outside help to cope with its most severe flooding in decades. About 600 people were dead or missing and 100,000 homeless after those floods, which destroyed more than 11 percent of the country’s crops.

North Korea is prone to floods and landslides due to poor drainage systems and massive deforestation after a famine in the 1990s that is believed to have killed as many as 2 million people.

The impoverished nation has relied on foreign aid to feed its 24 million people since its economy was devastated by natural disasters and mismanagement in the 1990s.

ORIGINAL POST: According to the Choson Ilbo:

Heavy rains since mid-July have inflicted heavy losses in North Korea, with 120 killed in Hungnam, South Hamgyong Province alone, Radio Free Asia reported Tuesday.

Quoting a source in Chongjin in the province, the radio station said over 2,000 people along the Songchon River were completely isolated when localized torrential rain that fell in Hungnam for three hours on July 22 flooded the dikes. Most of them were rescued by military helicopters and fishing boats, but 120, including 40 middle school students mobilized to help farmers, died.

A source in Sinuiju, North Pyongan Province said rumor has it that over 160 drowned in Hungnam. There are said to have been many casualties in Kaechon, South Pyongan Province as well.

Some 60 Workers’ Party officials heading for Mt. Baekdu on an inspection tour were stranded on their train as part of the railroad was washed away in Unhung, Yanggang Province, said a source in the province. All markets were closed due to destroyed roads and railroads, further aggravating the suffering of the locals.

North Korea’s official media detailed some of the damage from the rainstorms. North Korea Central TV on July 28 showed damage inflicted in July in the unusual format of a reporter discussing it with an official from the Ministry of Land Environment Protection, but they said nothing about casualties.

Read the full story here:
‘Hundreds of N.Koreans Killed in Floods’
Choson Ilbo
8/4/2010