North Korean Economy Watch

According to the Daily NK:

North Korean authorities released a public announcement that they will exchange deposits, consigned to the Chosun (North Korea) Central Bank during the currency redenomination in November last year, into new bills at the rate of 100:1 within the limit of 500,000 won.

Last November the North’s authorities announced that they will exchange the existing denomination, to a limit of 150,000 won per household, to the newly issued bills at the rate of 100:1. They urged people to deposit their remaining cash into the bank.

However, many citizens have refused to follow the instructions after previous experiences with forfeited deposits during the country’s fourth redenomination in 1992.

This measure is designed to work towards curing the hardships of residents caused by the decline in value of individual property since the last redenomination. There are hopes that it will stimulate market activity by increasing the amount of money in circulation, particularly since a downturn in purchasing power amongst the people led to an economic depression.

However, even after the Central Bank’s announcement the people remain apathetic. A source said that, “Prices have risen to similar levels as before the redenomination. Rice now costs over 1,000 won per kilogram; when you get back your deposit of 5,000 won you can only buy five kilograms of rice. It’s meaningless.”

If the state-designated price of rice, around 24 won per kilogram in procurement stores, had been maintained then this measure would be significant. Now the prices have multiplied by 50 and the people say that the measure is nothing but a play on words.

In addition, February saw the authorities hand down a decree to raise all state-designated prices by 100 times to levels known before the redenomination. The decree was not applied to people’s deposits in the bank, a fact that has received criticism from the public. A source commented that, “The authorities actions are nonsense. They raised prices by 100 times but people’s deposits were the same value as last year. It is ridiculous.”

Read the full sotry here:
Bank Deposits Can Be Withdrawn at 100:1 Rate
Daily NK
Park In Ho
7/29/2010

According to the Daily NK:

The price of rice has exceeded 1,000 won in border areas of North Korea, according to sources.

A source from North Hamkyung Province reported to The Daily NK on Sunday that the rice price had reached 1,050 won in Hoiryeong, 1,000 won in Hyesan and 950 won in Shinuiju.

Another source from Hoiryeong reported on Monday morning, “Rice prices have been going up since July, and they continue to rise steeply. Once rice prices go up, other prices follow suit. It is worrisome.”

The pace of the rises is dramatic. On the 1st of this month, the price hit 500 won, on around the 11th, 750 won, and on the 18th, 1,000 won. In just two weeks, then, it has doubled. If it keeps rising at this speed, it will rise to more than 1,200 won, a price which was also recorded in February this year.

Indeed, one South Korean NGO, People for Successful Corean Reunification (PSCORE), said today that the rice price in Musan, North Hamkyung Province has already hit 1,200 won.

Sources unanimously agree that the cause of the rises is the rising value of the Chinese Yuan.

The North Hamkyung Province source said, “In one week, one Yuan grew to be worth 220 won (from 150 won). That is exactly double the value of the won late last month.” It is also exactly the same rate of increase as rice is experiencing.

The source predicted that, “In short order, one Yuan may be worth 300 won.”

“People are suffering from increasing food prices. Even corn is now 500 won (per kilogram),” he added.

Even though the authorities hope to trumpet economic achievements in the September Delegates’ Conference in order to publicize Kim Jong Eun’s succession, it seems that complaints against the third generation succession as well as rising food prices are increasing.

Sources are watching with keen interest whether the authorities are planning to try and ameliorate the skyrocketing prices.

Read the full story below:
Rice Prices Break Through 1,000 Won
Daily NK
Yoo Gwan Hee
7/19/2010

UPDATE: UN World Health Organization has criticized the Amnesty report.  According to the Associated Press:

The World Health Organization found itself Friday in the strange position of defending North Korea’s health care system from an Amnesty International report, three months after WHO’s director described medicine in the totalitarian state as the envy of the developing world.

WHO spokesman Paul Garwood insisted he wasn’t criticizing Amnesty’s work, but the public relations flap illustrated an essential quandary for aid groups in unfree states: how to help innocent people without playing into the hands of their leaders.

Amnesty’s report on Thursday described North Korea’s health care system in shambles, with doctors sometimes performing amputations without anesthesia and working by candlelight in hospitals lacking essential medicine, heat and power. It also raised questions about whether coverage is universal as it — and WHO — claimed, noting most interviewees said they or a family member had given doctors cigarettes, alcohol or money to receive medical care. And those without any of these reported that they could get no health assistance at all.

Garwood said Thursday’s report by Amnesty was mainly anecdotal, with stories dating back to 2001, and not up to the U.N. agency’s scientific approach to evaluating health care.

“All the facts are from people who aren’t in the country,” Garwood told reporters in Geneva. “There’s no science in the research.”

The issue is sensitive for WHO because its director-general, Margaret Chan, praised the communist country after a visit in April and described its health care as the “envy” of most developing nations.

Major global relief agencies have been quietly fighting for years to save the lives of impoverished and malnourished North Koreans, even as the country’s go-it-alone government joined the exclusive club of nuclear weapons powers and wasted millions on confrontational military programs.

Some groups may fear being expelled from the country if they are openly critical of Pyongyang, which is highly sensitive to outside criticism. Still, Chan’s comments were uncommonly ebullient.

Garwood and WHO spokeswoman Fadela Chaib insisted that Amnesty’s report was complementary to their boss’ observations, and sought to downplay Chan’s praise for North Korea. Instead, they focused on the challenges she outlined for North Korea, from poor infrastructure and equipment to malnutrition and an inadequate supply of medicines.

But whereas Chan had noted that North Korea “has no lack of doctors and nurses,” Amnesty said some people had to walk two hours to get to a hospital for surgery. Chan cited the government’s “notable public health achievements,” while Amnesty said health care remained at a low level or was “progressively getting worse.”

Asked Friday what countries were envious of North Korea’s health, Chaib said she couldn’t name any. But she highlighted the importance of maintaining the health body’s presence in the country, where officials do their best to save lives despite “persisting challenges.”

“We are an organization dealing with member states, and we respect the sovereignty of all countries,” Chaib said. “We need to work there to improve the lives of people.”

Sam Zarifi, head of Amnesty’s Asia-Pacific program, said the human rights group stood by its findings.

“We certainly have a lot of restrictions in terms of working in North Korea, but we did our best in terms of capturing the information we could verify,” Zarifi said. “We don’t take the WHO’s statements as criticizing or rejecting Amnesty’s findings.”

He said Amnesty had spoken to North Koreans as well as to foreign health care and aid workers, and relied heavily on WHO for information — including the assessment that North Korea spends $1 per person per year on health care, the lowest level in the world.

The U.N. estimates that 8.7 million people need food in North Korea. The country has relied on foreign assistance to feed much of its population since the mid-1990s when its economy was hit by natural disasters and the loss of the regime’s Soviet benefactor.

North Korea, ruled by Kim Jong Il, is routinely described by U.N. and other reports as one of the world’s most repressive regimes.

Garwood said Amnesty’s research added a needed element to understanding health conditions in North Korea, but added that it didn’t even mention recent improvements in the country as the result of a program funded by South Korea and aided by WHO.

The U.N. body claims that maternal mortality has declined by over 20 percent since 2005, and diarrhea cases and deaths in operations have also dropped. It says more than 6,000 doctors and nurses have been trained in emergency obstetric care, newborn care and child illnesses, while clinics have received better material for operations, blood transplants and other medical interventions.

As for Chan’s April claim that “people in the country do not have to worry about a lack of financial resources to access care,” Garwood said hundreds of field missions have been conducted in North Korea.

“None have come back reporting the kinds of things in the Amnesty report in terms of payment for services,” he said.

“I’m not saying they’re not credible accounts,” he added. “But it’s not taking into account some of the things that are happening today.”

Zarifi, of Amnesty, said the whole debate would be ended if North Korea’s government provided access to monitors so that everyone had a better understanding of the country’s health care system.

“Every indication we have indicates the state of health care in North Korea is dire,” he said.

ORIGINAL POST: Here is the introduction to the report (which you can download here as a PDF):

In the early 1990s, the Democratic People’s Republic of Korea (DPRK or North Korea) faced a famine that killed up to one million people in a population that at the time hovered around 22 million (the current population stands at 23.9 million). Food shortages and a more general economic crisis have persisted to this day. The government has resolutely maintained that it is committed to, and capable of, providing for the basic needs of its people and satisfying their right to food and a proper standard of health. The testimonies presented in this report suggest otherwise. The people of North Korea suffer significant deprivation in their enjoyment of the right to adequate health care, in large part due to failed or counterproductive government policies. These poor policies include systematic failure to provide sufficient resources for basic health care (North Korea had one of the lowest levels of per capital funding for health care recorded by the World Health Organisation in 2006). After nearly two decades, food insecurity remains a critical concern for millions of North Koreans. This has been compounded by the government’s reluctance to seek international cooperation and assistance, which the government is obligated to do when it would otherwise be unable to ensure minimum essential levels of food for the whole population, and its restrictions on the delivery of humanitarian assistance. This delayed and inadequate response to the food crisis has significantly affected people’s health.

Additionally, a currency revaluation plan in November 2009 caused spiralling inflation that in turn aggravated food shortages and sparked social unrest. In the first few months after the plan went into effect, the North Korean government exacerbated the situation by restricting the use of foreign currency, closing down food markets, and prohibiting small-plot farming. Many people died of starvation and many others lost their entire savings.

Amnesty International has documented how widespread and chronic malnutrition, which suppresses people’s immune system, has triggered epidemics and mass outbreaks of illnesses related to poor diet. Interviews with North Koreans depict a country that professes to have a universal (free) health care system but in reality struggles to provide even the most basic service to the population. Health facilities are rundown and operate with frequent power cuts and no heat. Medical personnel often do not receive salaries, and many hospitals function without medicines and other essentials. As doctors have begun charging for their services, which is illegal under North Korea’s universal health care system, the poor cannot access full medical care, especially medicines and surgery.

The interviews conducted by Amnesty International indicate that the North Korean government has also failed its obligation to provide adequate public health information. As a result, most of the interviewees were unaware of the importance of seeking proper medical diagnoses or completing a course of medication. And, because many hospitals no longer supply free services or medicines (despite government commitments to the contrary), many people normally do not visit doctors even when they are ill.

In a 2004 report, Starved of Rights: Human rights and the food crisis in the Democratic People’s Republic of Korea (North Korea), Amnesty International documented actions of the North Korean government that aggravated the effects of the famine and the subsequent food crisis, including denying the existence of the problem for many years, and imposing ever tighter controls on the population to hide the true extent of the disaster from its own citizens. It also documented the government’s refusal to allow swift and equitable distribution of food and its imposition of restrictions on freedom of information and movement, which exacerbated the population’s ability to search for food.3 Although some progress has been made since 2004, access to food is still a critical issue in North Korea. As this report demonstrates, the inadequate and sometimes counter-productive actions of the North Korean government over the country’s food crisis have had a devastating impact on the health of the population.

Under international law and standards, North Korea is obligated to protect the rights of its population to the highest attainable standard of health. This means that, at the very least, the state must provide for adequate health care and the underlying determinants of health, including food and nutrition, housing, access to safe and potable water and adequate sanitation, safe and healthy working conditions, and a healthy environment. North Korea’s responsibilities under international and domestic law will be addressed in greater detail in section 5.

To improve the situation, Amnesty International presents the following key recommendations to the government of the Democratic People’s Republic of Korea with more detailed recommendations in the conclusion of this report.

Amnesty International calls on the North Korean government to:

1. as a matter of priority, ensure that food shortages are acknowledged and effective steps taken to address these shortages, including acceptance of needed international humanitarian assistance;

2. ensure the need-based and equitable distribution of health facilities, goods and services throughout the country;

3. co-operate with the World Food Programme and donors, allow unrestricted access to independent monitors, and ensure non-discrimination, transparency and openness in the distribution of food aid;

4.ensure that medical personnel are paid adequately and regularly so that they may carry out their duties properly;

5. undertake information and education campaigns to provide accurate and comprehensive information on prevalent infections and diseases; their causes, symptoms and treatment; and the importance of medical diagnosis and effective use of medicines.

Furthermore, Amnesty International recommends to the international community, and in particular, major donors and neighbouring countries such as China, Japan, Russian Federation, South Korea and US to:

1. ensure that the provision of humanitarian assistance in North Korea is based on need and is not subject to political conditions.

This report has received wide coverage in the media.  Here are the links:

Barbara Demick, Los Angeles Times

Choe Sang-hun, New York Times

Yonhap

BBC

Barbara Demick wrote an interesting piece in the New Yorker this week which captures first-hand stories about how the DPRK’s currency reform affected local families (not well).

Here is her article in PDF format.

According to the Joong Ang Ilbo:

North Korea is allowing Chinese fishermen into its territorial waters on the East Sea in exchange for cash, according to Seoul government officials.

The North Korean and Chinese governments recently agreed to allow squid boats from China to fish in North Korea’s waters, said a Seoul official who declined to be named.

About 250 Chinese boats are operating near Najin [Rajin/Rason] and Chongjin, two port cities in North Hamgyong Province, a northeast coastal area. It is the first time such a large number of Chinese crafts have been allowed to operate in North Korea’s seas, he said.

North Korea is collecting about 250,000 yuan ($36,913) for each boat for 2010, meaning the impoverished country is expected to earn about 62.5 million yuan in the deal.

“Many of the North’s fishing boats are extremely outdated and are experiencing intense fuel oil shortages, while squid prices in China have gone up due to supply shortages,” the official said. “So each side’s interests have been satisfied.”

North Korea has been hungry for more cash to finance state projects, including a so-called Pyongyang modernization project that involves paving major roads, upgrading railway networks and refurbishing urban streets.

“They are trying to secure more foreign currency through a commercial deal that is not subject to UN Security Council Resolution 1874,” said the official, referring to the UN economic sanctions adopted in June 2009 that involve trade restrictions, cargo inspections and other limits on financial transactions.

The Chinese fishing boats operating in the North’s sea mostly come from Dalian and Dandong, two ports in China’s northeastern coastal region.

“The fishing rights the Chinese boats have secured cover most of the North’s territorial waters on the East Sea,” said another Seoul official. The official expressed concern about possible overfishing by the Chinese, which may affect South Korean fishermen as well.

“Once squid start moving to the south, the Chinese fishing boats will travel farther south, possibly all the way down to Heungnam, Sinpo and Wonsan,” said another South Korean government official, referring to the North’s port cities in South Hamgyong Province.

Read the full article below:
North Korea leases out its squid beds to China
Joong Ang Ilbo
Chung Yong-soo
7/15/2010

According to the Daily NK:

As previously reported, the price of rice in North Korea, which declined in March, has started soaring again. But this rice price fluctuation looks different from those of previous years.

According to a source from North Hamkyung Province, rice in Hoiryeong market was between 450 and 500 won per kilogram until late June, but on July 13th it hit 750 won. Corn rice is also more than 400 won now.

At the same time, one Yuan is now worth 150 won.

Since the mid-2000s when the market economy started to spread, rice prices have risen during the spring poverty season in April and May. And then, in around late June, when potatoes and barley are harvested, prices stabilize, and then, in September, they decline in expectation of the harvest.

Therefore, traders in the jangmadang generally buy rice and other grains in November and December and then sell them in the jangmadang during April. Cadres also use that regular cycle of food price rises and falls to profit by buying rice late in the year and releasing it for a higher prices during the next spring. Therefore, poorer people also try to get rice and grain in winter time.

However, since the currency redenomination, the fluctuations have changed.

Immediately after the redenomination, the authorities released a measure shutting down the markets, so in January rice prices rose by around 60 times compared with before the redenomination. The markets have been open once again since February 5th, but food prices remained unstable through mid-March. That was because people did not buy grains until March, at which time demand promptly far outstripped supply.

In April this year, there was a limited amount of food distribution and some residents in some districts of Pyongyang received corn, which they were supposed to receive in May and June, in advance. Additionally, as a result of Kim Jong Il’s visit to China, rumor had it that a large amount of food would be delivered, so rice prices were relatively flat.

However, when the rumor turned out to be empty, a decree was handed down to lower units in May ordering food self-reliance at the local level. This only intensified anxiety about the food situation.

More serious problems may come in July and August, monsoon season. If the weather affects farming, anxiety about food for the last half of the year will grow. Make things worse, there was cold-weather damage to farming early this year, so a lost harvest is clearly going to be on people’s minds.

On this, one source said, “Food wholesalers predict that prices will go on rising until the harvest in August. And when rising food prices influence general products, big troubles can come, like they did in January of this year.”

 

Click image to see Hoeryong market prices.

Read the full story here:
Food Price Cycle Twisting in the Wind
Daily NK
Yoo Gwan Hee
7/13/2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-07-08-2
7-8-2010

As inter-Korean commerce has all but dried up in the wake of the Cheonan incident, trade between North Korea and China appears to have continued to grow. According to Chinese customs statistics released on July 6, trade with North Korea from January to May amounted to 983.63 million USD; 18.1 percent more than the 833.07 million USD reported for the same period last year.

North Korea imported 727.192 million USD-worth of Chinese goods (29 percent increase over the same period last year), but exports dropped by 4.9 percent, amounting to only 256.438 million USD. This indicates a 60 percent increase in North Korea’s trade deficit with China, which was 470.757 million USD in the first part of 2009. With South Korean sanctions against the North halting all inter-Korean trade outside of the Kaesong Industrial Complex following the sinking of the Cheonan, it is expected that Pyongyang will become even more economically dependent on Beijing.

During this period, crude oil accounted for most of North Korea’s imports from China, as Pyongyang bought 254,000 tons (slightly more than the 247,000 tons in early 2009). However, due to rising international fuel prices, this oil cost the North 157.097 million USD, a 76 percent increase over what Pyongyang spent during this period last year.

In addition, rice (24,400 tons), corn (31,400 tons), beans (20,500 tons), flour (34,000 tons) and other necessary food imports totaling 11,300 tons reflected a 41 percent increase over the same period in 2009. The cost of fertilizer imports also jumped sharply, amounting to 81,943 tons, or 115.6 percent more than the 38,004 tons imported from January to May 2009. Increasing imports of food and fertilizer are a result of the growing agricultural difficulties being faced in the North. Based on current prices, aviation fuel imports also grew by 46.8 percent, freight trucks by 98.7 percent, automobile fuel by 47.4 percent, and bituminous coal by 137 percent.

The top ten official imports of Chinese goods by North Korea were as follows: crude oil (21.6 percent); aviation fuel (3.1 percent); freight trucks (2.9 percent); automobile fuel (2 percent); bituminous coal (1.9 percent); fertilizer (1.8 percent); beans (1.6 percent); flour (1.6 percent); rice (1.5 percent); and corn (1.1 percent).

North Korea’s exports to China were mainly underground natural resources. The top ten exported goods were: iron ore (17.1 percent); anthracite (16 percent); pig iron (9.6 percent); zinc (5 percent); Magnesite (3.6 percent); lead (2.4 percent); silicon (2.3 percent); men’s clothing (2.2 percent); frozen squid (2.1 percent); and aluminum (1.9 percent).

According to the Daily NK:

The price of rice in the three northern provinces of North Korea (Yangkang, North and South Hamkyung) has risen above 750 won for the first time in four months.

A source from Yangkang Province told The Daily NK yesterday, “Chosun rice prices have reached a high of 750 won in the Hyesan jangmadang,” and added, “Rice prices in Hyesan, Wiyeon and Chundong in Yangkang Province are at a similar level.”

In Chongjin, North Hamkyung Province, on around the 5th of this month the price of a kilo of rice hit 700 won. If the inflationary trend were to continue, by late July or early in August, it could have surpassed 1,000 won.

That said, the future is hard to predict. Rice immediately after the redenomination could nominally be bought for 20 won per kilo, but by mid-March this year was setting people back more than 1,000 won. However, the next month, prices had dropped back to around 500 won.

The source explained that the reason for the current situation may be the rising exchange rate. One Yuan was 110 won until last month, but is currently worth more than 150 won. North Korean exchange rates tend not to go down without intervention, so without any decisive measures by the authorities to stabilize rice prices, the result will be a rise in prices overall.

Hyesan in Yangkang Province is one of the comparatively free places where traders can visit China once every two weeks or so; therefore, rice prices were quite fluid. However, the reason why rice prices even in this city continue to rise is that there is not enough rice being imported, while exchange rates are rising inexorably.

The North Korean authorities once tried to lower prices by releasing rice from military stores. However, the effect was fleeting.

According to the source, the Hyesan jangmadang currently opens at 3PM and closes at 7PM due to agricultural activities, but trading is unrestricted. No regulations on price or usage of foreign currency are in place, but trade in industrial products remains slow due to the dire economic status of the majority of residents.

The authorities are trying to emphasize economic achievements in order to promote Kim Jong Eun’s succession, but the economic situation people are facing is far from satisfactory.

Read the full story here:
Rice Prices on the Rise
Daily NK
Shin Joo Hyun
7/13/2010

According to the Telegraph:

Previously considered to be among the regime’s most important assets, the North Korean People’s Army has always been well provisioned in order to ensure the troops remain loyal.

But a poor harvest and the disastrous revaluation of the North Korean currency in November of last year has worsened the nation’s already dire economic straits.

Defectors have claimed that they were required to survive on noodles made of ground corn and that meat or fish were a luxury, a journalist for Japan’s Asahi Shimbun reported from the Chinese  city of Shenyang.

On one stretch of the border, Chinese troops apprehended five North Korean soldiers in May alone. Prior to the sinking of the South Korean corvette Cheonan in March, allegedly by a torpedo fired from a North Korean submarine, it was rare for troops to be taken into custody on the Chinese side of the Yalu River.

The defectors have claimed that senior members of the party and the armed forces were stockpiling provisions, another indication that the regime is steeling itself for a military confrontation.

“In the past there have been cases of North Korean troops crossing the border and plundering Chinese farms for their food, which they then took back to their posts in the North,” Kim Sang-hun, a human rights activist in Seoul, told The Daily Telegraph.

However, these soldiers chose to return to the North with the supplies.

Robert Dujarric, a professor of international relations specialising in North-East Asia, said the situation in North Korea was “very bad” at present, due to the poor harvest, but a more dramatic indicator of the scale of the problem would be if military officers or members of elite military units opted to follow in the footsteps of these soldiers.

The defectors apprehended by the Chinese were reportedly returned to North Korea, where they face execution.

Read the full story here:
North Korean soldiers defect to China fuelling fears of imminent military clash
Telegraph
Julian Ryall
7/12/2010

According to KBS:

Red Cross to Help NK Prepare for Monsoon Season

The International Federation of Red Cross and Red Crescent Societies reportedly plans to allocate around nine million dollars this year for projects to support North Korea ahead of the monsoon season.

Radio Free Asia said Wednesday that the Red Cross plans to select 31 towns that are considered to be the most vulnerable to natural disasters and will provide them with up to nine-and-a-half million dollars for preparedness training and to build dams and reservoirs.

The report said the international organization’s plans aim to help some eight-point-two million North Koreans this year.

The Red Cross also plans to form a committee on preventing natural disasters in the North from this month until mid-September, when the region is affected by monsoon rains.

And according to another KBS story:

WFP to Spend $2.8 Mln on NK Food Aid

The U.N. World Food Program (WFP) has decided to spend nearly two-point-eight million U.S. dollars on food aid for North Korea.

The funding for the aid was provided by the Swedish government.

Radio Free Asia quoted WFP global media coordinator Greg Barrow as saying that his agency will use the Swedish donation to help North Korea, which is in desperate need of emergency food aid.

Barrow said that the North will require even more donations from countries around the world, given that the current amount of food aid for the impoverished nation is expected to run out by September.

Read the full stories here:
WFP to Spend $2.8 Mln on NK Food Aid
KBS
7/7/2010

Red Cross to Help NK Prepare for Monsoon Season
KBS
7/7/2010