North Korean Economy Watch

UPDATE 3: Stephan Haggard and Marcus Noland chime in with “Famine in North Korea Redux”. 

UPDATE 2: IFES notes that Pyongyang is acknowledging the food shortage:

DPRK stressing unaided resolution to food crisis
Institute for Far Eastern Studies (IFES)
NK Brief No. 08-10-24-1
10/24/2008

On October 22, the North Korean Workers’ Party newspaper, Rodong Shinmun, reported on the international food crisis, and stressed, ‘The only things we can trust in the face of today’s severe food crisis are the efforts and self sacrifice of our blood, sweat, and tears,’ emphasizing an autonomous resolution to the food problem.

According to the paper, Kim Jong Il stated, “Today in our country, the agricultural problem is a very important problem that must be decisively resolved in order to build a strong and prosperous socialist nation.”

In particular, the paper stressed the urgency of the food problems, reporting, “Rice and food are of the utmost importance, like a lifeline to us,” while admitting that fertilizer, agricultural chemicals, fuel, and other essential items were in short supply, but adding, “the basis of agricultural production is not physical conditions, but determination.” By emphasizing that ‘determination’ would be key to solving the problem was a way of indirectly admitting that the government did not have the means to provide the supplies necessary to increase agricultural output.

The tone of the article conveys the idea that as the food crisis worsens around the world, international food aid to North Korea is being reduced, causing the worsening of the food crisis in the DPRK. It would appear that the government is trying to calm the people’s discontent by blaming outside influences, while at the same time mobilizing the efforts of North Korean farm workers.

While all of North Korea’s media sources have been repeatedly reporting the current global food crisis, they have emphasized that most others do not have rice to give, and those that do are not giving it, so that the North’s domestic food shortages need to be resolved by the North Koreans themselves.

UPDATE: Jess adds some great statistics in the comments. 

The Daily NK reports on the Ministry of Unification’s claims about the DPRK’s food situation.

ORIGINAL POST:We are getting some mixed messages on the state of the DPRK’s agricultural production and access to food….

Last month, IFES and the Daily NK reported that the DPRK was expecting a decent harvest this fall since the country’s farmlands were spared the seasonal flooding of the previous years:

A source involved in China-North Korea trade at a company in Shenyang was quoted on the 30th as saying, “[North Korean] rice traders are expecting this year’s food production to be considerably improved compared to last year,” and, “This year, with no large natural disasters, rice paddies and crop fields are doing well, and crop production will probably be much greater than last year.”

In a related matter, one North Korean insider reported, “With the [North Korean] food situation, no one is doing as well as the wholesalers,” and, “As the fall harvest season has come, traders have come by farms in each province and reported that rice and corn harvests are very good.”

The source went on to say, “This year, farming was not difficult, so as autumn passes, the market price of rice looks likely to fall. The price of corn will fall even faster, hitting the 1000 won per kilogram level by mid October.” In fact, by the end of this year’s fall harvest, the price of food is expected to return to pre-shock levels. Currently, rice is selling for 2200 won and corn for 1300 won per kilogram in North Korean markets. (IFES)

This week, however, the UN World Food Program sent the opposite signal, highlighting the acute food shortages they are seeing:

The UN food agency said Thursday that millions of North Koreans face a food crisis, but a South Korean official said that Seoul has not decided whether to respond to a request for food aid to the communist country.

“Some areas of the northeastern provinces in the country … have become extremely vulnerable, facing a situation of a humanitarian emergency,” Jean-Pierre de Margerie, the WFP’s country director for North Korea, said at a forum on North Korea.

Around 2.7 million people on North Korea’s west coast will also run out of food in October, the WFP said in a report released Tuesday.

The food shortages have forced many North Koreans to go to hills to collect wild food to complement their daily rations and reduce the number of meals per day to two, said de Margerie.

Asked if North Koreans face starvation, he said his agency hasn’t seen any evidence of starvation but said, “We have reached (a) very critical level and we shouldn’t wait for another starvation before ringing the alarm bells.”

The WFP also said the food shortages have especially affected urban households in areas with low industrial activity due to higher food prices, reductions in public food rations and lower employment.

Donor countries should back us up … Now is (the) time to act,” de Margerie said. (AP via New Zealand’s 3 News)

According to another report in the Times of London:

On Tuesday, WFP announced that some 2.7 million people on North Korea’s west coast will run out of food in October, and that, because of the worsening food situation, it was increasing from 1.9 million to 6.5 million the population which it seeks to help with food aid.

“Some areas of the north-eastern provinces in the country have become extremely vulnerable, facing a situation of a humanitarian emergency,” the organisation’s programme director for North Korea said. “We have reached a very critical level and we shouldn’t wait for another starvation before ringing the alarm bells.”

Additionally, UN’s point man on North Korean human rights, Vitit Muntarbhorn, has gone so far as to claim North Korea is clamping down on mobile phones and long distance telephone calls to prevent the spread of news about a worsening food crisis (Times of London). 

The South Korean Ministry of Unification, however, is publicly disputing the UNWFP’s numbers:

A South Korean official has disputed the U.N.’s assessment that millions of North Koreans are at risk of food shortages, saying Friday that the impoverished communist country does not appear to face a “serious” food emergency.

Unification Ministry spokesman Kim Ho-nyeon said that North Korea’s harvest this year is not bad, citing South Korean civic officials who recently visited the country.

“We believe that the North’s food condition is not in a serious crisis situation,” Kim told reporters, adding that the weather has been good and there were no heavy rains like the ones that devastated the North last year.

His comments came a day after the U.N. food agency said millions of North Koreans face a food crisis and called on donor countries, including South Korea, to provide urgent food aid.

This week the Wall Street Journal did a pretty thorough review of the North – South Korean “height gap” after John McCain mentioned it in a presidential debate.  Here is a hefty quote from the post (well worth reading here):

…Several checked and (here, here, and here) found studies supporting his claim of a height gap, though the gap’s size depends on which South Koreans and North Koreans you’re measuring. The researchers behind these studies told me that McCain’s statement is true of younger Koreans, but not of adults. (A McCain campaign spokesman didn’t respond to my request for the source of the claim.)

One study of North Korean refugees compared to South Koreans of the same age found that South Korean young men were 2.3 inches taller than their North Korean counterparts, while the gap among young women was 2.6 inches. Meanwhile, among non-refugee boys and girls living in both countries between the ages of one and a half and six and a half, a separate study found that the height gap was around three inches (varying slightly by age and gender); between six and a half and seven and a half, the height gap was 4.9 inches for girls and five inches for boys.

The height gap is so age-dependent for two reasons, researchers told me: People of different ages experience peak growth at different times, and at different times the discrepancies between the two Koreas in nutrition, health and overall well-being may differ. Also, adults who were undernourished as children may catch up slightly later.

“Adults were raised 20 to 50 years ago — thus, you proxy the environmental impact in the past, so it does not really make sense comparing different time periods,” Daniel Schwekendiek, author of the study of child heights, said.

Schwekendiek, an economist at Germany’s University of Tuebingen, was a postdoc student of Sunyoung Pak, a biological anthropologist at Seoul National University who conducted the refugee study. Pak said it’s unclear whether refugees are a representative sample of the North Korean population, though she did point out that the older people she studied, born in the 1930s, were taller than their southern-born counterparts, suggesting that there has been a growing height gap, as North Korean height growth stagnated. (People, like other mammals, tend to be heavier and taller at greater latitudes, Pak said.)

Schwekendiek’s samples were randomly selected — in North Korea, by the United Nations in 10 of 12 provinces, to investigate malnutrition, and in wealthier, healthier South Korea, by the Korean Research Institute of Standards and Sciences, on behalf of industries that wanted to produce goods that fit children.

Both researchers said height is a useful measure of well-being because North Koreans and South Koreans share genetic ancestry, and also because height numbers are more reliable and objective than economic stats coming out of Pyongyang. “As height and weight are measured physically, this leaves less room for political manipulation compared to conventional health and human welfare indicators,” Schwekendiek said.

Wall Street Journal
The Numbers Guy
The Korean Height Gap
10/15/2008

According to Yonhap:

Under the Unification Ministry’s budget plan for next year, the inter-Korean economic cooperation fund, aimed at promoting cross-border human exchanges and economic partnerships, will increase 8.6 percent to 1.5 trillion won from 1.3 trillion won this year.

The budget for humanitarian assistance accounts for 72 percent of the fund, a sharp rise from 43 percent this year, mainly attributable to hikes in rice and fertilizer prices, said the ministry in change of policy on North Korea.

“We plan to send 400,000 tons of rice and 300,000 tons of fertilizer to North Korea if needed,” Vice Unification Minister Hong Yang-ho told reporters.

The ministry has allocated 352 billion won to send rice and 291 billion won for fertilizer aid, he added.

The budget for inter-Korean economic projects, however, has been halved to 300 billion won in accordance with the Lee administration’s policy of linking them with progress in efforts to denuclearize the North, economic feasibility, financial capacity, and public opinion.

Meanwhile, the ministry has created a separate account for denuclearization costs in the inter-Korean cooperation fund, a measure to take into effect on Friday, a day after the second anniversary of North Korea’s nuclear test.

South Korea has delivered fuel oil and energy-related materials to North Korea under an aid-for-denuclearization deal last year in the six-way nuclear talks. Related spending has been categorized as energy aid.

Read the full article here:
S. Korea budgets $460 million for rice, fertilizer aid to N. Korea
Yonhap
10/9/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-10-7-1
10/17/2008

It appears that many in North Korea are expecting an exceptionally large increase in this years’ harvest. According to a report issued on September 30 by Daily NK, a South Korean organization working for North Korean human rights, rice and corn market traders and those involved in food distribution are saying that grain harvests this year are significantly larger than last year, that by the end of the harvest season in November, North Korea’s food shortage crisis will be considerably eased, and that the price of rice will stabilize as well.

A source involved in China-North Korea trade at a company in Shenyang was quoted on the 30th as saying, “[North Korean] rice traders are expecting this year’s food production to be considerably improved compared to last year,” and, “This year, with no large natural disasters, rice paddies and crop fields are doing well, and crop production will probably be much greater than last year.”

In a related matter, one North Korean insider reported, “With the [North Korean] food situation, no one is doing as well as the wholesalers,” and, “As the fall harvest season has come, traders have come by farms in each province and reported that rice and corn harvests are very good.”

The source went on to say, “This year, farming was not difficult, so as autumn passes, the market price of rice looks likely to fall. The price of corn will fall even faster, hitting the 1000 won per kilogram level by mid October.” In fact, by the end of this year’s fall harvest, the price of food is expected to return to pre-shock levels. Currently, rice is selling for 2200 won and corn for 1300 won per kilogram in North Korean markets.

The reason harvests are expected to be more abundant this year is that the North has not suffered from flooding, as it had for the past several years in a row. Therefore, the government has called on the people to take care not to let any grain go to waste as harvesting is already in full swing in Hwanghae and South Pyungan provinces.

North Korean food wholesalers have become the suppliers of rice for markets since the government ceased to ration foodstuffs. They now contract with farms, paying in advance of harvest seasons so that the farms can use the funds to purchase fuel and other supplies necessary for preparing and transporting the food.

Because these traders personally visit the farms to predict harvests and set prices, the information is considered to be relatively accurate. These traders were also the first to predict the jump in prices earlier this year, warning of shortages even before last year’s fall harvest.

Daily NK
Lee Sung Jin
10/7/2008

An inside source from North Korea reported on the 6th that the North Korean authorities have ordered that any woman under the age of 70 who is able to hear, see, and move should participate in the activities of the “Chosun (Korean) Democratic Women’s Union.”

According to the source, “The Central Committee of the Women’s Union Chairwoman Kim Soon Hee decreed that the elderly who are able to move must participate in Union activities, rather than uselessly sitting around and complaining about society.”

After the worsening food situation, the source said that the elderly often sit around and pour forth their complaints about society, saying that “We did not live like this before… If we worked, at least we received wages and provisions, but what kind of a situation is this nowadays?” and blaming the inadequate governance of officials.

Since the food crisis, there have been many instances of the elderly selling goods in alleyways or at street-stands. In particular, after the implementation of the regulation of December 2007 which prevents women less than 40 years of age doing business in the market, the elderly increasingly sell products at stands which are managed by young women from behind the scenes.

Elderly women who do business in the jangmadang (market) have been accordingly playing the role of circulators of all kinds of rumors and complaints, such as saying, “How many more years are left in our lives? At least our children must live well, but there is no sign of that and it is much worse than the Japanese colonial period; how can we not blame the world?”

The recent measure can be seen as another ploy to control the citizens by the North Korean authorities. However, involving elderly women in organizational activities to prevent the worsening of civilian sentiment has been protested against by constituents as well as the elderly.

The elderly who heard the recent news have complained, “It is difficult enough just to live until our 60s, how can they tell us to participate in the Women’s Union activities as well?”

Also, the source relayed elderly concerns over their livelihoods, “Members participate in study sessions twice a week and have to carry out tasks distributed by the Union, so they do not have time to sell in the market. In their free time during the difficult period, they have been doing business and helping their families get by. The changed regulation is a death sentence for these families.”

Currently, the total number of members in the Korean Democratic Women’s Union, which started out as the “North Chosun Democratic Women’s Union” on November 18, 1945, is around 200,000. Until now, the targeted entrants have been women over 31 and below 55 who do not belong in other organizations or working places. The main activities of the Women’s Union are studying political ideology regarding women and rolling out various projects.

North Korea Uncovered: Version 12
Download it here

About this Project: This map covers North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, energy infrastructure, political facilities, sports venues, military establishments, religious facilities, leisure destinations, national parks, shipping, mining, and railway infrastructure. It is continually expanding and undergoing revisions. This is the 12th version.

Additions include: Tongch’ang-dong launch facility overlay (thanks to Mr. Bermudez), Yongbyon overlay with destroyed cooling tower (thanks to Jung Min Noh), “The Barn” (where the Pueblo crew were kept), Kim Chaek Taehung Fishing Enterprise, Hamhung University of education, Haeju Zoo, Pyongyang: Kim il Sung Institute of Politics, Polish Embassy, Munsu Diplomatic Store, Munsu Gas Station, Munsu Friendship Restaurant, Mongolian Embassy, Nigerian Embassy, UN World Food Program Building, CONCERN House, Czech Republic Embassy, Rungnang Cinema, Pyongyang University of Science and Technology, Pyongyang Number 3 Hospital, Electric Machines Facotry, Bonghuajinlyoso, Second National Academy of Sciences, Central Committee Building, Party Administration Building, Central Statistics Bureau, Willow Capital Food House, Thongounjong Pleasure Ground, Onpho spa, Phipa Resort Hotel, Sunoni Chemical Complex (east coast refinery), Ponghwa Chemical complex (west coast refinery), Songbon Port Revolutionary Monument, Hoeryong People’s Library, Pyongyang Monument to the anti Japanese martyrs, tideland reclamation project on Taegye Island. Additionally the electricity grid was expanded and the thermal power plants have been better organized. Additional thanks to Ryan for his pointers.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your contributions to this project.

Version 12 available: Download it here

UPDATE:Here is V. Pomnyun’s outline: pomnyun.pdf

NKeconWatch notes:
Agriculture: April – June are the lean months.  In July 2008 potatoes helped alleviate food shortage.  Also aid from West. Things began to get worse in August and September.

Earlier this year, the price of rice was up to 5x higher than a year ago.  In June-July it fell to 3x higher.  Now it is creeping back up.

Arduous March: In the 1990s, urban residents of North Hamgyong Province was the worst affected by famine.  Today, the worst affected are the farmers and rural residents of Hwangae (he did not specify north or south).  Shortage as bad as 1st arduous march, but fewer consumers and markets feed cities now.

Markets: protests in Chongjin.  People chanted, “Give us food or let us trade.”  None of the protests are political, just expressions of frustration.

Nukes:Nuclear weapons are a domestic propaganda weapon as well. Not just a matter of foreign policy.

Original Post:
Program details here
Wednesday, September 24
2:00 – 4:00 pm
Rome Auditorium at SAIS
1619 Massachusetts Ave., NW
Washington, DC 20036
RSVP here

The Venerable Pomnyun Sunim, Chairman of Good Friends and The Peace Foundation, will discuss the current political and social climate in North Korea, including the spread of the black market economy and the increase in political control over North Korea’s elite. Joining his discussion, is Dr. Cho Seong-ryoul, Director of the New Security Studies Program at the Institute for National Security Strategy (INSS), who will offer his insights on current and future inter-Korean relations.

Institute for Far Eastern Studies  (IFES)
(NK Brief No. 08-9-18-1)
2008-09-18

The latest issue of the North Korean academic journal “Institute for Social Science Bulletin” (no.3, 2008) stressed that in order to resolve the North’s food shortage problems as quickly as possible, “it is necessary to take a good assessment of future food consumption [needs].”

In this issue, recently obtained in South Korea, an article reads, “the project for resolving the food issue cannot be pushed forward into the future, and while taking into consideration what steps can be taken now, the country’s food problems cannot ultimately be relieved by relying only on short-term benefits. On the contrary, [this] can adversely affect the future resolution of the food issue.”

The journal also added, “The task of restructuring food production must start with an assessment of future food consumption and start off with a view of long term interests rather than from starting from a standpoint of short-term interests in order to completely relieve food supply problems.” It stressed, “These days, resolving the country’s food supply problem is the most urgent and important task…solving food issues is an urgent problem that cannot be delayed a single moment,” but warned, “while the food issue must be solved without a day’s delay, recklessly pushing forward without scientific calculation or goals could result in insufficient and disorganized future results.”

Markets work because price increases send entrepreners strong signals of relative scarcity and potential profit opporunities (unless these price increases are caused by inflation).  Entrepreneurs who pick up on these signals, then, have a strong incentive to move the desired resources from where they are valued less to where they are valued more.

A Chinese official in Jilin claims entrepreneurs in his province hear these signals loud and clear—and they respond the way humans have for thousands of years–they arbitrage:

The head of the grains bureau of Jilin, the Chinese province bordering North Korea, Zhu Yehui, says a drought in North Korea is very serious, and there is a lot of corn smuggling from China into North Korea.

He says the price in North Korea is more than 10 times the domestic price in China.

I am going to go out on a limb to suggest that these Chinese smugglers (entrepreneurs) are also delivering food more cheaply (on average) than the World Food Program, and I also am willing to wager that they have better access to “sensitive areas.” 

Addendum: According to Yonhap North Korea’s grain crop last year reportedly amounted to 4 million tons. The U.N. Food and Agricultural Organization told U.S.-based Radio Free Asia last month that the North will harvest a half million tons less than last year.

Read the full article here:
China reports grain smuggling business active into North Korea
Australian Broadacsting Corporation
9/17/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-9-9-1
9/9/2008

In order to inform the North Korean public of the current economic situation on the 60th anniversary of the establishment of the Democratic People’s Republic of Korea (Sept. 9), state-run media outlets in the North are reporting on the construction or expansion of factories and facilities in each region of the country.

According to reports by (North) Korean Central Broadcasting, Pyongyang Broadcasting and other North Korea media outlets, three to four production facilities per month began operations through July, and seven facilities opened last month. The news is also reporting that six new facilities have been completed or have begun operations during what little time has passed this month.

It appears that North Korea is concentrating its efforts on expanding production facilities in the mining and metalwork production realm, despite facing difficulties brought on by resource and material shortages. Construction work to increase the Kumduk Mining Enterprise’s mineral conveyance system capacity in Danchon, South Hamyong Province, the heart of the iron and zinc-producing region, was completed at the end of last month, as was the first stage of construction on the refurbishment of the Danchon Mining Equipment Factory. Construction on a new production factory extracting primary elements from coal was completed this month at the Moonpyoung Refinery in Kangwon Province, where gold and other minerals are mined. Authorities are toting the new facilities as “One More Monumental Creation of the Military-First Era.”

North Korean media outlets are also reporting on economic developments affecting food supply to the North Korean population. In the town of Singye, North Hwangae Province, the Singye Sweet Potato Processing Plant, which produces noodles, sweets, and other food products from sweet potatoes, went into production at the beginning of August. It was also reported that in the middle of last month, construction was completed on a computerized meatpacking plant at the Kangseo Pork Processing Facility in Pyongnam. On the third of last month another pig farm in Kanggye, one which Kim Jong Il complemented during an on-site inspection in January, calling it “one more modern livestock facility for Jagang Province,” also began operations.

The Generator No. 1 and the pressure tube at the Wonsan Centennial Power Plant were completed in the middle of last month, and the water flow channel for Generator No. 2 at the Baekdu Mountain Military First Centennial Power Plant and the Pyongnam Military First Centennial Power Plant were completed at the beginning of this month.

In reporting the completion of power plant construction projects, the media announced that they “would be able to contribute to the improvement of the lives of the people and the normalization of factory and enterprise production.”