North Korean Economy Watch

According to Yonhap:

North Korea brought in 13,834 tons of grain from the neighboring ally in January, a 3.6-fold increase from 3,869 tons in January last year, said Kwon Tae-jin, a senior researcher on the North’s agricultural sector at the South’s Korea Rural Economic Institute in a posting on his blog.

Rice accounted for about 61 percent or 8,425 tons of the North’s grain import from China, followed by corn with 3,448 tons, beans with 1,553 tons and wheat with 304 tons, Kwon said, citing data from the Korea International Trade Association.

“The big rise in imports of corn and beans, which the North didn’t bring in last year, appears to be not only because corn harvests were not good, but it also suggests the North increased imports over concerns about possible food shortages,” he said.

Kwon also said that the North’s regime could have increased imports to enlarge state food rations after last year’s currency reform caused strains on the country’s food supply system.

North Korea has relied on foreign handouts to feed its 24 million population after natural disasters and mismanagement devastated its economy. The situation worsened in recent years as South Korea halted regular food aid to the North after President Lee Myung-bak took office in early 2008 under a policy to link aid to Pyongyang’s process in ending its nuclear weapons programs.

… 

The U.N. food agency, Food and Agriculture Organization, said early this month that the North is expected to be short of about 1-1.2 million tons of food this year.

I think the data for this story came from this KITA web page, but I can’t be sure since my Korean is exceptionally limited. Here is a description of the KITA page in English.

On a personal note, I wish the major South Korean media outlets  would get into the habit of posting links to their sources.  It is not difficult to do this.  

Read the full article here:
N. Korea’s food imports from China more than triple in January: expert
Yonhap
3/12/2010

Daily NK
Yoo Gwan Hee
3/5/2010

North Korea’s “Land Reform Law” was signed into law on March 5th 1946, and for a while it offered North Korea a way to produce enough food to feed its people.

The following are the basic contents of the law as implemented by the North Korean Provisional People’s Committee, which was led by Kim Il Sung.

Those Japanese and Korean landlords who possessed more than 50,000 square meters of land were to have it expropriated and distributed to existing tenant farmers for free, whilst the existing tenant farming system was to be abolished. The basic principles of the law were land expropriation without compensation and land distribution for free to former peasant tenants. However, those owning more than 50,000 square meters of land but without tenant peasants were excluded.

In accordance with the provisions of Article 5 of the law, the Committee granted farmers ownership, stating, “All expropriated land is to be distributed to farmers for free.” However, post-distribution use of the land was restricted; Article 10 of the law prohibited using land as collateral in lending, the selling of land or subletting to tenants. As the law itself puts it, “The distributed land cannot be given over to tenant farming and/or used as collateral.”

At the time of the law’s enacting, Korea had been liberated from Japanese colonial rule, but around 58 percent of arable land was still owned by a minority of pro-Japanese landlords constituting just four percent of the population. Meanwhile, most North Koreans in 1946 were farmers, 80 percent of all farmers were extremely poor, and they represented a majority of the total North Korean population. Naturally, the new law was very popular. It was, after all, an opportunity for the Communist Party to appeal to the masses. The political situation was especially complex; a country divided between Soviet-occupied North and American-occupied South, political factions coalescing around different parties, and factions emerging within the Party itself.

In North Korea, the North Korean Provisional People’s Committee and the Communist Party led land reform by organizing 90,697 members into 11,500 farming committees in 1946. They also organized 210,000 farmers aged 18-35 into a semi-military organization, the so-called “self-defense forces,” who supported the projects of the farming committees. During three weeks of land reform, 98 percent of confiscated land was distributed to farmers; poor farmers suddenly became the landlord of up to 13,200 square meters of land. Thereafter, they tended to farm hard and gave their allegiance to the Party.

The farming committee members were instrumental in carrying out the land reform, mostly by aiding in distribution and record keeping. Committee members subsequently became Communist party members and supported the regime at the regional and local level. Consequently, the number of party members rose from 4,530 in December 1945, to 26,000 in April 1946 and 356,000 by June 1946. The success of the land reform consolidated the authority of the North Korean Provisional People’s Committee, and resulted in successful elections for the North Korean Provisional People’s Committee in February 1947 at the local level.

However, following the birth of the North Korean state, individual ownership of land was ended by another national project. The collective farming system, implemented over the course of 1954-1958, resulted in farmers becoming employees on collective farms. The pretext for the collective farming system was communal ownership under the socialist system, but in reality it was a way to realize state control. Article 5 of the Land Reform Law was abolished and the farmers’ dreams of personal and equitable land ownership were swept away in the name of socialist modernization.

Ultimately, the inefficiency and unjust nature of the collective farming system combined with other factors resulted in the March of Tribulation in the late 1990s and the continuing hardships of the average North Korean family today.

Nowadays, farmers tend to solve their food security problems not by working hard on the collective farms, but by farming their own fields around their houses or on steep mountainsides. Their private production is, of course, relatively greater than that of the collective farms.

The way to solve the food crisis is, of course, quite simple; return the land back to the farmers. The North Korean authorities know that private ownership of land is the best way in practice to solve the food problem, but they fear what this might mean for the regime’s viability.

According to Yonhap (3/9/2010):

South Korea’s Red Cross said it will send 20 tons of powdered skim milk to North Korea on Wednesday as part of humanitarian aid to the impoverished neighbor.

The aid worth 156 million won (US$137,000) will be delivered on two 11-ton trucks across the inter-Korean border and unloaded in the border town of Kaesong, the Red Cross said in a release.

In January, North Korea accepted a proposal by the South to provide powdered milk along with other types of aid as humanitarian assistance.

Photo in the Hankyoreh.

Choson Ilbo
3/9/2010

North Korea has launched a massive campaign to persuade people into farming to make up for a shortage, giving them ideological indoctrination and offering large benefits, sources say.

Civic group North Korea Intellectuals Solidarity said the party held seminars at party chapters on Feb. 23 promising W10,000 in cash and 120 kg of food for households if they voluntarily move to farms.

The Workers’ Party recently distributed copies of a training manual for senior officials on fortifying rural bases. “To increase grain production the most important thing is to make up for a shortage in the rural workforce. This is why blue-collar workers and office workers in urban areas, senior officials in particular, should lead the vanguard in the campaign.” The regime is urging the wives of senior officials in the party and security agencies to set an example for others.

The regime is afraid of the possibility of mounting public discontent if it forces people to relocate at a time when they are seething in the wake of a disastrous currency reform. The regime is giving indoctrination classes to senior officials to move to rural areas and urging them to set an example, news media speculated.

But the group said such efforts would not be effective in persuading ordinary North Koreans to move to rural areas because living conditions there are very bad. “It’s very likely that the regime will end up forcibly relocating them,” it added.

Daily NK
Jin Hyuk Su
3/8/2010

Rice price inflation, a key indicator of the spiraling inflation which has beset the North Korean economy as a whole since the November, 2009 redenomination, shows no signs of slowing down, with the price in North Hamkyung Province reaching 1,500 won per kilo as of the 7th.

A source from North Hamkyung Province told The Daily NK the news by phone yesterday, saying, “In the Nammun jangmadang, in Hoiryeong, at around 2PM this afternoon, the rice price per kilogram was more than 1,500 won.”

He also reported, “I called a friend of mine who lives in the Songpyung-district of Chongjin, and he said that the rice price per kilogram in the Sabong jangmadang there had gone over 1,450 won.”

The source added, “Although the Hoiryeong food distribution situation is actually better than elsewhere because this is Kim Jong Suk’s home town, since the value of the new money is continuously deteriorating and the exchange rate has skyrocketed, the prices of all products, as well as rice, have continued to soar.”

The source also noted that promised food distribution had failed to materialize. According to his friend, when Kim Jong Il went to Kim Chaek Steel Mill in Chongjin on the 5th, he told them that food distribution would soon be released. But, that has yet to happen; “just words,” as the source put it.

He went on, “The value of the dollar is rising uncontrollably. Since the economy is in such a mess, the dollar’s value cannot stabilize, only fluctuate.”

“Residents in Hoiryeong and Chongjin expected that when Kim Jong Il came to their Province, maybe to the steel mills, food distribution would be released, but there have been no practical moves on that.”

Exchange rates have also been soaring erratically, the source reported; as of today one dollar is being traded for 1,750 won and one Yuan for 250 won.

With a kilo of rice now costing an unaffordable 1,500 won, residents are growing more and more incredulous, not to mention pessimistic, about the future; “Suicides are increasing,” the source asserted.

“Last year, elderly people committed suicide because they were pessimistic about their lives, but these days, more than a few young people are doing it too.”

According to Yonhap:

South Korea’s planned shipment of its first food aid to North Korea in years has hit a snag due to sourcing difficulties, an official said Saturday.

The South has been preparing to send 10,000 tons of corn to the impoverished neighbor since mid-January, right after Pyongyang accepted its aid offer made months earlier. The shipment would mark Seoul’s first food assistance to the North since President Lee Myung-bak took office in early 2008.

The government has since approved a 4 billion won (US$3.5 million) budget to fund the assistance and notified the North of a shipping route, based on a plan to buy corn in China and ship it directly to the North from there.

“Considering shipping costs, it would make the most sense to send Chinese corn” to the North, a government official said on customary condition of anonymity.

The official said, however, that the plan has faltered because of China’s “grain export quota,” which places restrictions on food exports in order to meet the country’s rising domestic demand.

The delay has raised concern that the planned aid may not be delivered by the time the North needs it the most — usually between March and May when food shortages in the country worsen — because it usually takes at least a month after the purchase is made for such to be delivered.

But the government official said that he believes the problem will be resolved soon, though he did not elaborate.

Read the full article here:
South Korea’s planned food aid for North Korea hits snag
Yonhap
3/6/2010

Andrei Lankov offers some thoughtful analysis on recent North Korea developments in the Asia Times:

Contrary to oft-stated accusations, Pyongyang leaders are neither irrational nor ideology-driven; they are a bunch of brilliant Machiavellians, very apt at exploiting the fears and controversies of their enemies and their partners alike.

Their country’s economy is in a sorry state, to be sure, but survival of the population has never been a major item on their agenda. They just want to stay in control and not be overthrown by popular insurrection or by a coup – they are very good at this game.

…

However, over the past year or so, something strange has begun to happen in Pyongyang. The North Korean leadership has taken some actions that have clearly damaged the interests of the ruling clique. It seems that the once formidable manipulators have for some reason lost their ability to judge and plan.

The recent currency reform is the best example of such weird and self-defeating policy decisions. For years, the Pyongyang government has waged campaigns against the unofficial and semi-official markets that have played a decisive role in North Korea’s economic life since the collapse of the state-run economy in the 1990s. As another move in this ongoing (and, perhaps, unwinnable) struggle, last November the government initiated currency reform that was meant to undermine the power of black-market merchants.

The reform was modeled on confiscation-oriented currency reforms once used in the Soviet Union and other communist countries. One morning, the populace suddenly learned that old bank notes were null and void and had to be changed for new ones within a week. The exchange rate was set as 1:100, so, for example, 1,000 “old” won should be exchanged for 10 “new” won.

Accordingly, all retail prices and fees were also reduced one hundred times. Harsh exchange limits were introduced: only the equivalent of US$30 in cash could be changed by one person. The use of foreign currency, which had become very common in North Korea’s retail economy, was banned.

The measures are standard for communist-style currency reform, since such reform usually pursues the double goal of fighting inflation and reducing the power and influence of the unofficial black economy.

However, North Korea’s planners also did something unexpected: they claimed that nominal wages and salaries would not change. In other words, a person who prior to the reform received a monthly salary of 3,000 won, would still receive 3,000 won, but paid in the new currency. Effectively, it meant that all wages in the country suddenly increased 100 times. To assure consumers, the government issued stern warnings against profiteers who dared to raise prices of goods and services.

For a brief while in December and early January, North Korean customers felt rich and consumers expected that even such luxuries as, say, Chinese bikes (a North Korean equivalent to a Porsche) were now within their reach.

The actual result was less impressive. The dramatic increase in salaries launched an equally dramatic round of inflation, so in the past three months the price of rice (and the black market exchange rate) has increased 50 times, from the official required 20 “new” won per kilogram to 1,000 “new” won. The government’s “stern warnings” were ignored. In the near future, prices are likely to return to pre-reform levels. The reform has failed completely and it only succeeded in making people irritated and in demonstrating the government’s inability to control a situation.

The unprecedented decision to raise wages doomed the entire affair from the start. But why was it done? Why was an otherwise standard package of well-tested measures saddled with this self-defeating (and, frankly, stupid) addition?

In the realm of diplomacy, North Korea is not faring much better. For decades, Pyongyang has demonstrated uncanny skills in manipulating its neighbors from whom it squeezed unconditional aid and unilateral concessions. The usual tactics consisted of three stages. In the first stage, the North Koreans raise tensions. Secondly, they launch missiles, test nuclear devices and make threatening statements. Finally, once tensions are sufficiently high for the world to feel uneasy, there are negotiations in which Pyongyang extracts aid that is essentially a reward for calming a crisis the North itself manufactured.

This time, both stage one and stage two were seriously mishandled. First, the North Koreans used both their trump blackmail cards – a nuclear test and a missile launch – almost simultaneously (analysts expected space of at least a few months before these two events). They also showered Washington with especially bellicose rhetoric, even though the Barack Obama administration was initially relatively soft on the North Korean issue.

As a result, the excessive activity of the North Koreans backfired: the US foreign policy establishment finally realized that North Korea would not surrender its nuclear program under whatever circumstances. This reassessment of the situation (or belated realization) meant that the US was now far less willing to shower Pyongyang with concessions. In the past, gifts were presented as incentives to surrender nuclear weapons, and since such surrender is now seen as unlikely, such generosity is not necessary. (See US finally wise to Pyongyang’s ways, Asia Times Online, November 12, 2009)

The North Koreans are now beginning to realize that the old trick is not working. They have only themselves to blame. Had they been slightly more careful last year, a significant part of the US establishment would still nurture the illusionary dream of “denuclearization through negotiations”.

The third stage of asking for aid was also handled badly. The unnecessarily aggressive rhetoric of the past was replaced by unusual softness in a short time – previously, the switch took months. Since August, North Korea has essentially begged to restart negotiations with the US and, especially, South Korea.

Pyongyang is demanding to restart cooperation projects. It is quite remarkable, since two of the three major projects – tours of Keumgang Mountain and Kaesong city tours – were abruptly stopped by North Korean authorities a year ago. Needless to say, the South Korean government is not too eager to restart negotiations. After all, so-called intra-Korean cooperation is essentially unilateral South Korean aid in disguise and Seoul sees no reason why it should hurry with the resumption of money transfers to Pyongyang. North Korean softness is (wrongly) seen by Seoul hardliners as a victory of the hard line they are advocating, so they say that an even harder approach will probably bring greater success.

Meanwhile, the North Korean government also did something it has never done before: it said “sorry” to the people. In January, Nodong Sinmun, a government mouthpiece, reported that Dear Leader Kim Jong-il felt bad for being unable to provide his subjects with the level of material affluence they were once promised.

The promise was moderate, to be sure. In the 1960s, Kim Il-sung, the founding father of the country and also father of the current dictator, promised that eventually all Koreans would eat rice (not corn or barley) and meat soup, live in houses with tiled roofs (not thatched), and wear silk clothes.

Every North Korean knows that even this moderate paradise has failed to materialize. However, the fact has never been admitted openly. In the past, economic difficulties and hardships, if mentioned at all, were always explained as they should be explained in a solid dictatorship, that is, by references to scheming enemies, above all US imperialists.

This time, Kim’s remark indicated that the system itself might bear some responsibility for economic problems.

In accordance with the new mood, a high-level official allegedly expressed his regret about the chaos created by the currency reform while addressing a large group of the party faithful. This might appear like normal behavior, but in a dictatorship that claims the possession of absolute truth and an infallible leader, such statements are very unusual – and, indeed, dangerous. They are likely to be seen as signs of fallibility and weakness, and every dictator knows that such signs should not be shown.

In other words, something has changed in Pyongyang recently – seemingly, after Kim’s illness in late 2008, when he reportedly suffered a stroke. The most likely explanation seems to be biological: the increasing inability of the ailing dictator to pass reasonable judgments and control people around him.

One can easily imagine how the Dear Leader (perhaps even driven by genuine sympathy to his long-suffering people) would look through a currency reform plan and say: “And what about poor wage-earners? Should we not reward the people who remained loyal to the socialist industry and did not go for black markets? Why not increase their salaries, so they will become affluent, more affluent than those anti-socialist profiteers of the black market?” Few, if any, officials would dare to explain the dire economic consequences of such generosity.

It is also possible that the deteriorating health condition of Kim has led to growing rivalry between factions so the North Korean leadership is now increasingly disunited, with rival groups pushing through their own agendas.

At any rate, something unusual seems to be happening in Pyongyang and it’s probably the time to think about the future a bit more seriously. We are heading towards serious changes, and unfortunately nobody seems prepared.

Read the full story here:
Is the Dear Leader losing his grip?
Asia Times
Andrei Lankov
3/5/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-3-4-1
3/4/2010

As the failure of North Korea’s currency reform drives the country’s food woes to even greater depths, DPRK authorities and farmers from around the country met on February 25 for two days of meetings under the theme, “Let’s Focus All Efforts on Farming and Resolve the Food Problem!”

It has been four years since North Korean authorities called for a nationwide meeting of agricultural workers, with the last meeting in February 2006. From 1974 to 1994, meetings were held annually in January or February, when farmers had a chance to rest between the fall harvest and the spring planting season. However, after the famine in 1995, in which millions starved to death, no meetings were held for twelve years.

This year’s New Year’s Joint Editorial called for North Koreans to revolutionize the light industrial and agricultural sectors in order to improve the lives of the people, and for them to struggle to resolve the country’s ‘eating issues’. However, in the aftermath of last December’s failed currency reform, the North’s food problems actually worsened to the point that people are starving to death. This led authorities to hold a nationwide agricultural meeting in order to show their determination to focus efforts on resolving food shortages and to encourage farmers and other residents to focus on agriculture.

According to the (North) Korean Central News Agency (KCNA), the meetings were attended by “[Cabinet Premier] Kim Young Il, [National Defense Commission Vice-Chairman] Ri Yong Mu, and [Supreme People’s Assembly Chairman] Choe Tae Bok, leading officials of ministries and national institutions, party and people”s committees and agricultural guidance organs in provinces, cities and counties, officials of farm primary organizations, model farmers, scientists and technicians in the field of agriculture and officials of relevant industrial establishments.”

Vice-Premier Kwak Pom Gi presented a report, stressing, “On the agricultural front this year, marking the 65th anniversary of the founding of the Party, we must decisively ease the country’s food issue, [and] the people’s eating issue, charging forward with the improvement of the lives of the people and the construction of a strong and prosperous nation.” He also called for assistance to agricultural communities and related sectors, and for the prioritization of agricultural goods and materials.

According to a source in North Korea reporting to the South Korean organization Good Friends, deaths due to starvation in South Hamgyong Province’s Danchon city and South Pyongan Province’s Pyongsong city were reported to central Party authorities. This led to meetings on January 27 and February 1 of central Party members, cabinet officials and People’s Security authorities at which emergency measures to stave off famine were discussed.

Results of a survey of living conditions in Danchon and North Hamgyong Province’s Chongjin reported to central Party authorities revealed many deaths due to starvation, while currently, the most deaths due to lack of food appear to be occurring in South Pyongan Province’s Sunchon and Pyongsong cities. Last year, Party authorities in these cities turned over approximately 65 percent of harvests to the military, while farmers were only issued, on average, five months worth of rations.

According to the Financial Times:

“The WFP can continue to support around 1.4m children and pregnant women with fortified foods until the end of June. However, new contributions are required now or the operation will come to a standstill in July. We are hopeful that donors will come forward with contributions, given the situation,” he told the Financial Times.

In 2008 the WFP hoped 6.2m people would receive such aid but found it increasingly hard to get donations. Annual aid to North Korea is equivalent to $4.50 (€3.30, £3) per person across the population. The average across other low-income countries is $37 per person.

The WFP has survived such funding crunches in the past, but UN officials fear donors have now become exasperated with North Korea, which expelled US non-governmental organisations last March. Pyongyang has severely restricted aid workers’ access, has demanded they give longer notice periods before rural visits and has barred teams from using their own Korean speakers.

Rocky relations with the US and South Korea after Pyongyang launched a long-range missile last April and tested an atomic warhead in May have further discouraged donations.

The US, once the leading food donor, has said it will not supply cereals until North Korea resumes proper monitoring, allowing aid agencies to track the final recipients.

North Korea’s harvests cannot feed all its people and in recent years the annual food deficit was about 1m tonnes. People are chronically malnourished and as many as 1m are believed to have died during famine in the 1990s.

It is hard to determine the scale of malnutrition but Kim Jong-il, the country’s dictator, made a very rare apology this year for failing to deliver “rice and meat stew” to the people. Food markets were thrown into disarray late last year by a currency redenomination but Mr Due, based in Pyongyang, said these seemed to be returning to normal.

Read the full article below:
Donor fatigue threatens aid for North Korea
Financial Times
Christian Oliver and Anna Fifield
3/3/2010

Nautilus Institute Policy Forum Online 10-015A
Aiden Foster-Carter
3/4/2010

Too many Kim Yong-ils

Korean names can set traps for the unwary. Amid a multitude of Kims, almost all unrelated, North Korea adds an extra twist. German speakers, and some others, tend to mispronounce the J in Kim Jong-il as a Y. Not only is this incorrect, but currently it can confuse; for North Korea’s Premier – head of the civilian Cabinet, as distinct from the Dear Leader who chairs the more powerful National Defence Commission (NDC) – is named Kim Yong-il.

To add to the confusion, another Kim Yong-il was until recently vice foreign minister (one of several), but in January became director of the ruling Workers’ Party of Korea (WPK)’s international department: a post apparently vacant since 2007. As such, this Kim Yong-il met his Chinese counterpart Wang Jiarui, head of the Chinese Communist Party (CCP)’s international liaison department, when Wang visited Pyongyang in early February. Since his promotion, Kim Yong-il 2 (as it may be best to call him) has been reported as frequently at Kim Jong-il’s side. This suggests he may see far more of the Dear Leader than does anyone else involved in DPRK foreign policy, including the man hitherto thought to be the eminence grise on that front: first vice foreign minister Kang Sok-ju, who negotiated the 1994 Agreed Framework with the US. It was Kang whom the current US special envoy on North Korea, Stephen Bosworth, demanded to meet when he visited Pyongyang in December, rather than the North’s main nuclear negotiator Kim Kye-gwan: a more junior deputy foreign minister.

Or is Washington behind the curve? That Kim Yong-il 2 is the DPRK’s new foreign affairs head honcho seemed confirmed on February 23, when he turned up in Beijing and went right to the top: going straight into talks with President Hu Jintao and separately with Wang Jiarui. This flurry of activity suggests two possibilities. Either Kim Jong-il will soon visit China, as he is overdue to do; or North Korea may return to the nuclear Six Party Talks (6PT), which have not met in over a year. Or perhaps both, if we are especially fortunate.

If both Kim Yong-ils are now leading players, perhaps one of them could change his name? That is not a frivolous suggestion. Some DPRK officials do this, for no clear reason. Often the change is small, so this is not a case of deception. Thus Paek Nam-sun, DPRK foreign minister – meaning chief meeter and greeter rather than top negotiator – from 1998 until his death in 2007, was originally Paek Nam-jun. Ri Jong-hyok, who as vice-chairman of the Asia-Pacific Peace Committee (APPC) now handles relations with the South, was Ri Dong-hyok in the 1980s when this writer knew him as head of North Korea’s mission in Paris.

(For completeness, yet another Kim Yong-il was Kim Jong-il’s late half-brother. He died of liver cirrhosis in 2000 aged only 45 in Berlin, where he had a diplomatic posting tantamount to exile – as his elder brother Kim Pyong-il, the DPRK ambassador to Poland, still does.)

Jong and Yong both say sorry

The past month saw both Chairman and Premier Kim doing something almost unheard of in Pyongyang. Apparently they both said sorry, although some reports got the two muddled up.

On February 1 Rodong Sinmun, daily paper of the ruling Workers’ Party of Korea (WPK), reported Kim Jong-il as lamenting his failure to fulfil his late father Kim Il-sung’s pledge, to which he had also alluded shortly before on January 9, that all North Koreans would eat rice and meat soup (everyday fare for even the poorest South Korean, be it noted). This time Kim said: “What I should do now is feed the world’s greatest people with rice and let them eat their fill of bread and noodles. Let us all honour the oath we made before the Leader and help our people feed themselves without having to know broken rice [an inferior version]”.

Given Kim Jong-il’s own notoriety as gourmet and gourmand, his professed “compassion” for his less fortunate subjects’ deprivation may induce queasiness. Yet even this not-quite-apology glosses over the truth. Broken rice? They should be so lucky. As readers of Barbara Demick’s excellent and heartbreaking new book Nothing to Envy will know, rice of any kind – whole or broken – is a rare luxury for most North Koreans. In the late 1990s a million or so starved to death; even today most remain malnourished. One refugee who fled to China saw her first rice in years in the first house she came to – in a dog’s bowl. That is the true reality.

Worse, all this was and is avoidable: the result of stupid and vicious policies, not the natural disasters that the regime blames. The real cause was the government’s failure to adapt in the 1990s after Moscow abruptly pulled the plug on aid. This hurt other ex-Soviet client states too. Cuba went for tourism; Vietnam tried cautious reform; Mongolia sold minerals. North Korea, bizarrely, did nothing – except watch its old system break down and growth plunge.

In a speech at Kim Il-sung University in December 1996, when famine was seriously biting, Kim Jong-il lashed out at the WPK and uttered this petulant but very revealing whinge:

In this complex situation, I cannot solve all the problems while I have the duty of being in charge of practical economic projects as well as the overall economy, since I have to control important sectors such as the military and the party as well. If I concentrated only on the economy there would be irrecoverable damage to the revolution. The great leader told me when he was alive never to be involved in economic projects, just concentrate on the military and the party and leave economics to party functionaries. If I do delve into economics then I cannot run the party and the military effectively.

Evidently Bill Clinton’s famously apt watchword, which helped him win the presidency in 1992, had not breached North Korea’s thick walls and heads. It’s the economy, stupid! The paternal advice was dead wrong. (The full speech can be read on the much-missed Kimsoft website. Unsurprisingly it is not part of the DPRK’s official canon of the dear leader’s works, but the scholarly consensus is that it is genuine. A slightly different version appears here.)

Redenomination disaster

Mass starvation, you might hope, would prompt some soul-searching and fresh thinking. From mid-2002 North Korea did essay cautious market reforms, but recently it has tried to squash Pandora back in her box. The latest such crass effort, a currency redenomination that deliberately wiped out most people’s meagre savings, was discussed in December’s Update.

By all accounts this has backfired badly, sparking runaway inflation (which it was supposed to stanch) and even riots. Forced on the defensive, the regime has issued an unprecedented apology. This being North Korea, it has not done so publicly; there are limits. Nor, in 2010 as in 1996, is Kim Jong-il about to take the rap, despite some newswires confusing J with Y.

But reliable intelligence claims that on February 5 Premier Kim Yong-il called all leaders of neigbourhood groups (inminban) to Pyongyang. The lowest unit in the DPRK’s still tight system of socio-political control, each comprises 20-40 households. This suggests that over 10,000 people heard the premier say what no leader had ever said to them before: sorry. In his words: “I offer a sincere apology about the currency reform, as we pushed ahead with it without sufficient preparation and it caused a great pain to the people… We will do our best to stabilize people’s lives.” The audience’s reaction is not recorded.

The situation on the ground remains confused, but markets appear to be functioning again unhindered. Good Friends, a seemingly well-informed South Korean Buddhist NGO, said on February 18 that after examining a report on food shortages and conditions nationwide by the Office of Economic Policy Review, the WPK Central Committee issued an ‘Order for Absolutely No Regulation Regarding Foodstuffs’. All markets are to reopen as they were before recent government crackdowns, and under no circumstances must local authorities try to regulate food sales – “until central distribution is running smoothly.” There may be a sting in that tail, but for now this is a complete, humiliating government U-turn and climbdown.

This is an astonishing episode, which history may record as pivotal. If the leadership learns its lesson and finally accepts that the market economy is as ineluctable as gravity, then the DPRK might conceivably survive on a reconstituted economic base and social contract, like today’s China or Vietnam. But if Kim Jong-il (or whoever) keeps trying to square the circle, under the delusion that correct politics is a substitute for sound economics, there is no hope.

Sea shells

Relations with South Korea remain an odd blend of sabre-rattling and dialogue. Four times in the past month, starting on January 25 and most recently on February 19, the North has declared a series of no-sail zones for varied time periods. Some of these adjoin two ROK-held islands close to the Northern coast, Baengnyong and Daechong. For three days (January 27-29) the Korean People’s Army (KPA) fired volleys of artillery shells near the Northern Limit Line (NLL): the de facto western sea border since 1953, which the North rejects.

Though no shells actually crossed the NLL, on the first day the South called this provocative and fired back – but again only within its own waters south of the line. By late February, a Southern defence spokesman called the latest shelling “a routine situation that is part of the North’s winter military exercise”, adding that this may go on till the end of March. Routine or not, a report submitted to the ROK National Assembly’s Defence Committee on February 19 said Pyongyang has reinforced its military along the west coast of the peninsula and has strengthened military drills.

Kaesong and Kumgang remain unsettled

The shelling did not stop the Koreas talking about their two joint venture zones just north of the Demilitarised Zone (DMZ). But they got nowhere, beiing far apart on the agenda, format and venue for talks. On the Kaesong Industrial Complex (KIC) – see last month’s Update for more details – the North suggested that the South’s issues – it wants smoother cross-border passage – were best left to military-level talks, which in the past have handled issues relating to the border and security. The South agreed, proposing February 23 at the border village of Panmunjom: the venue for all military meetings hitherto. The North then counter-proposed March 2, at Kaesong; but on February 22 the South said it will insist on Panmunjom, rather than set the precedent of holding a military meeting inside North Korea. With both venue and agenda still in dispute, the chances of progress on the substantive issues looks remote.

Mount Kumgang tours remain suspended

Separately, South Korea with some misgivings accepted the North’s request for talks on resuming tours to the Mount Kumgang resort, suspended since a Southern tourist was shot dead there in July 2008. At the talks held in Kaesong on February 8, North Korea asked for tours to restart from April 1. It breezily declared that the South’s three conditions – a probe into the shooting, efforts to ensure no repetition, and a cast-iron safety guarantee – had been met. But as the North well knows, the South’s key demand is to send in its own investigating team – which the North resolutely refuses. The Northern side proposed continuing the talks on February 12, but the South declined unless the North accepts their three conditions first.

More arms are interdicted

UN sanctions imposed last June after North Korea’s second nuclear test seem to be biting. In February South Africa told the Security Council that in November it inspected a ship headed for the Congo Republic (Congo-Brazzaville). The French owners reported suspicions about cargo they took on in Malaysia from a Chinese vessel. Seizing the containers, South Africa found that what the manifest called “spare parts of bulldozer” were in fact tank components. The shipping agent, and likely origin, is North Korean. China said it will investigate its own vessel’s role in the affair. UN resolution 1874 bans almost all DPRK weapons exports.

More ambiguously, on February 11 Thailand dropped charges against the crew of a plane seized in December and found to contain 35 tonnes of weapons from North Korea, including five crates of Manpads (man-portable air defence systems) which terrorists can use to shoot down aircraft. Next day all five were put on a flight to Almaty. Four are Kazakhs, and their government had asked that they be sent home to be tried. It will be dismaying if they are not.