North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
2013-7-11

North Korea is attempting to restart its halted food distribution system. In March, military food provisions were released to the public and food distribution is reported to have resumed on a biweekly basis. The provision of food rations for more than three consecutive months is a rare occurrence.

A North Korean defector organization in South Korea, NK Intellectuals Solidarity, released the following information in their information briefing session: “From June 1, it was confirmed that residents in border cities and towns received food distribution every 15 days, about 470 grams per person a day.”

The foods distributed were mainly from Warehouse No. 2, stockpiled as military food provisions. It is unclear how long the food distribution will last but North Korea appears to be straining itself to revive the food distribution system in order to resolve the food shortage problem.

According to Radio Free Asia, the North Korean government has begun to reissue food stamps, with residents in North Hamgyong Province having confirmed recently the receipt of such stamps.

North Korean economic policy has focused mainly on the agricultural sector and food supply. There appears to be gradual improvement. The price of 1 kg of rice in January was about 6,600 KPW in Pyongyang and by June it dropped to 5,000 KPW. The price of rice is reported to have dropped in other cities such as Sinuiju and Haesan by as much as 1,000 KPW.

However, a South Korean official commented that the food distribution is not equal nationwide, as some regions are left without food rations. He added, “Unless North Korea is able to secure sufficient supply of food, it will be difficult to revive the food distribution system of the past.”

Meanwhile, some have testified that North Korea is leasing farm lands to urban workers in cooperative farms as a means to resolve the food crisis.

Citing an unnamed source in North Korea, NK Intellectuals Solidarity stated that “state-owned collective farm lands are being leased to city workers,” explaining this as a measure to overcome the current food situation as work in factories in the cities also has declined.

NK Intellectuals Solidarity explained that farm lands are being leased on an annual basis and workers in various state factories and enterprises are receiving about 250 pyong (826.4 square meters) of land per employee.

Employees must allocate a portion of their harvest to the state (100g of corn and 50g of beans per pyong (3.3 square meters) and the total yield of harvest will be counted as the total production output of the farm. The expectation is that this method of leasing land of cooperative farms will resolve the food shortages in the cities and improve the food supply of the entire nation.

Institute for Far Eastern Studies (IFES)
2013-7-5

Compared to last year, the activities of Kim Jong Un for the first half of 2013 revealed that he took part in more public activities with working groups rather than senior officials.

According to the ROK Ministry of Unification (MOU), Kim Jong Un has made 95 public appearances, which is an increase of 117 percent compared to the previous year of 81 public activities.

In particular, Kim took part in military related activities the most (29 times) as the U.S. and South Korea held joint military exercises (Key Resolve and Foal Eagle) in the earlier part of this year. His other public activities were economic related (28 times), social and cultural (18 times), political (14 times), and attendance at various performances (8 times).

However, starting from April 1, Chairman Kim’s military-related activities from first quarter to second quarter decreased from 50 to 15 percent while his economy-related activities increased from 10 to 50 percent.

Furthermore, economy-related activities this year entailed visitations to production units in machinery factories, cooperative farms, and business enterprises and complexes. The previous year saw mainly entertainment-related activities.

Compared to his father Kim Jong Il, on his onsite inspections Kim Jong Un was accompanied by an entourage consisting of proportionally more working-level officials rather than senior officials. While his first year inspections were accompanied by senior officials, the group accompanying Kim Jong Un are younger and experienced officials in the field. In particular, Choe Hwi, first vice department director of the Korean Workers’ Party Central Committee, is seen with Kim Jong Un the most. Choe Hwi is a graduate of Kim Il Sung University and served as secretary of the Youth League and senior deputy director of the Korean Workers’ Party politburo.

Meanwhile, South Korea’s Unification Ministry estimated the amount of rice reserve in North Korea remains the same as last year, although there is regional variation. Grain imports are at 75 percent against the previous year, and the food ration and situation range widely by region. The market price for 1 kg of rice is 5,000 KPW, which is valued at approximately 1.667 USD, or about 600 g per one USD or 8,000 KRW.

In addition, the MOU assesses that North Korea is making changes in its economic management under the name of “Our Method of Economic Management,” with relatively heavy focus on agriculture, light, and distribution industries. The North Korean leadership seems to recognize the importance of production output in the economic sector. However, it will be impossible to observe immediate results without improvements in raw materials, power, machines, and equipment.

On the other hand, the MOU analyzes that the North Korean leadership is placing more attention on the agricultural sector and improving production and supply of fertilizer since it shows an immediately visible result in the agricultural sector, especially to the North Korean residents. In this regard, the military is also increasingly emphasizing “self-reliance” and the need for “solving food issues on its own.”

According to the Daily NK:

Food prices in North Korean markets have declined to their lowest point since the year began, with rice now holding steady at around 5,000won/kg in Pyongyang and 5,400won in the border city of Hyesan. The low prices appear to be a response to seasonal factors plus the ongoing distribution of a portion of wartime rice stocks.

The North Korean authorities opened wartime rice stores in March, seemingly in response to public anger at mass mobilization for military exercises that characterized the time. Distribution of food has been maintained on some level since then.

“They have been giving fifteen days of distribution to workers since March, based on the number of members in a family,” a source from Hyesan confirmed to Daily NK on the 2nd. “Most of it has been corn and the quality of the rice is poor, but they gave five and ten days of food through mid-June so life has been easier.” Ten days of food equals 4.5kg of grain for a factory worker, and 2kg for dependent family members.

A Pyongyang source confirmed the situation in the North Korean capital, saying, “We received distribution from the authorities in the middle of last month; it was mostly made up of new potatoes. Since then there has been a lot of grain on the market so the price of rice has fallen, and it has been in the low 5000s ever since.”

According to inside sources, the price of rice was in the 5,600-7,000won range from January to May, then entered the 5,500-6,300won range during May and into early June, before declining further in recent days.

Market prices fall naturally when market demand for grain declines following state distribution. Additional factors also compound the phenomenon: notably, Party cadres and other affluent groups tend to put their distributed rice directly into the market, since they don’t wish to consume the low-quality product, while the distribution of new potatoes to farmers simultaneously reduces rural demand for grain.

Also, according to the Hyesan source, “Poor people are less concerned with being unable to eat now and more worried about the future, so they sell their rice to gather money, too. Since cadres don’t normally eat their distributed rice either, when there is distribution it can seem as if everyone is trying to sell all their rice in the market at the same time.”

However, “The amounts being distributed are slowly decreasing, suggesting that their capacity to deliver distribution may have a limit,” the source warned. “The authorities say that distribution will continue, but people are not ready to believe that.”

Read the full story here:
Mix of Factors Brings Rice Price Down
Daily NK
Lee Sang Yong
2013-7-2

According to Yonhap (via Global Post):

North Korea has started to lend state-owned farmland to city laborers as part of efforts to solve chronic food shortages, a local group said Wednesday,

“Since mid-May, the North started to lend state-owned cooperative farmland to city workers as part of its various efforts to solve serious food shortage problems for city workers,” the North Korea Intellectuals Solidarity said in a press conference, citing inside sources in the North.

City laborers are bearing the brunt of food shortages in the North while farming workers have easier access to farm produce, the group said.

North Korean leader Kim Jong-un is well aware of growing indignation among citizens over food shortages and in order to quell their anger, the leader is drawing a variety of ideas to help them feed themselves, it said.

The latest farmland renting plan is one of the North’s ideas to help solve food shortages, according to the study group.

Under the plan, one plant worker or state firm employee can borrow up to 826.5 square meters of land belonging to state-owned cooperative farms and they are required to pay about 25 kilograms of corn or 12.5 kg of beans in rent, the group said.

The country is promoting the plan as an effective way to encourage workers to raise self-sufficiency as well as to increase national agricultural output, it said, adding that some citizens are pessimistic about the plan because of the shortages of seeds, fertilizer and other tools needed for farming.

Read the full story here:
N. Korea starts to lend farmland to city workers to solve food shortage
Yonhap (via Global Post)
2013-6-26

According to Agence France-Presse:

The UN food body on Saturday said it had approved $200 million of food aid for North Korea, targeting the country’s most vulnerable people who remain dependent on external assistance.

The World Food Programme (WFP) executive board has this week approved a new two-year operation for North Korea starting on July 1, WFP spokesman Marcus Prior said.

“It will target about 2.4 million people – almost all children, and pregnant and nursing women – with about 207,000 [206,800] metric tons of food assistance at a cost of US$200 million,” he said in an email to AFP.

The WFP will continue to focus on the nutritional needs of young children and their mothers through food which will be manufactured in the North using ingredients imported by the food body, he said.

“WFP remains very concerned about the long-term intellectual and physical development of young children in particular who are malnourished due to a diet lacking in key proteins, fats and micronutrients,” added Prior.

In March, UN resident coordinator in North Korea Desiree Jongsma said timely imports from the WFP had contributed to avoiding a crisis this year but two thirds of the nation’s 24 million population were still chronically food insecure.

Nearly 28 percent of children under five in the North suffer from chronic malnutrition and four percent are acutely malnourished, according to a UN national nutrition survey last year.

Overall production for the main 2012 harvest and early season crops this year was expected to reach 5.8 million tonnes, up 10 percent on 2011-2012, UN agencies said in November.

But the poverty-stricken country is still struggling to eradicate malnutrition and provide its people with vital protein, the UN’s Food and Agriculture Organization and WFP said.

North Korea suffered regular chronic food shortages under the Kim dynasty, with the situation exacerbated by floods, droughts and mismanagement. During a famine in the mid to late-1990s, hundreds of thousands died.

International food aid, especially that from South Korea and the United States, has been drastically cut over the past several years amid tensions over the communist state’s nuclear and missile programmes.

The US last provided food aid to North Korea from late 2008 to March 2009. Some 170,000 tonnes out of an expected 500,000 tonnes was delivered, until Pyongyang expelled US workers monitoring the distribution.

Here is the official announcement.

Quarterly bulletin for WFP’s operation Nutrition Support to Women and Children in DPR Korea (Q1, 2013)

DPRK National Nutrition Survey (October 2012)

Read the full story here:
UN food body approves $200 mn food aid to N. Korea
Agence France-Presse
2013-6-8

UPDATE 1 (2013-5-27): The DPRK has significantly its imports of Chinese fertilizers. According to Yonhap:

North Korea’s fertilizer imports from China jumped nearly five-fold last month from a year earlier, a report showed Monday, pointing to Pyongyang’s efforts to increase agricultural produce.

The North brought in 91,318 tons of Chinese fertilizer in April, compared with 15,218 tons a year earlier, according to the report released by Kwon Tae-jin, an analyst at the Korea Rural Economic Institute.

For the January-April period, the total fertilizer imports from China, the North’s closest provider of resources, came to 121,109 tons, 4.6 times more than those shipped in for the same four months last year, according to the report based on data from the Korea International Trade Association.

The sharp increase in fertilizer imports seems unexpected, given that China is imposing high-rate export customs in order to limit outbound shipments of Chinese fertilizer, Kwon said.

“The increase this year shows that the North is putting top priority on boosting productivity in the agricultural sector as well as that the conditions for fertilizer production in the North Korea are in a bad shape,” the analyst said.

The report also showed that the North imported 25,850 tons of grains like rice and corn from China last month, only half of what it brought in from China a year earlier.

Read the full story here:
N. Korea’s fertilizer imports from China jump 5-fold in April
Yonhap
2013-5-27

Original Post (2013-4-30): According to Yonhap, the DPRK has increased its imports of Chinese fertilizers.

According to the report by the Korea Rural Economic Institute (KREI), Pyongyang bought 29,791 tons of chemical fertilizers from its neighbor, up 3.6 fold from the 6,530 tons it imported for the same three month period in 2012.

It said for March alone, the country brought in 28,725 tons of fertilizer.

“Normally the North imports fertilizers in April,” said Kwon Tae-jin, a research fellow at KREI. He said the fact that it bought so much ahead of when it usually imports the product means Pyongyang may be interested in improving farm output.

North Korean leader Kim Jong-un had said earlier in the year that the North needs to concentrate on farming and light industries in 2013 because they directly impact the everyday lives of people.

The expert, in addition, speculated that a surge in imports could be the result of problems in local fertilizer production.

The latest findings based on data provided by Korea International Trade Association, meanwhile, showed the North importing 54,178 tons of grain from China in the first quarter, an increase of 31.6 percent from the year before.

Total imports as measured in dollars also jumped 39.2 percent on-year to US$24.71 million from $17.75 million in the first three months of last year.

Read the full story here:
N. Korea’s imports of Chinese fertilizers jump in Q1: report
Yonhap
2013-4-30

UPDATE 2 (2013-5-24): South Korea has again requested that the DPRK repay past food loans. According to Yonhap:

South Korea again called on North Korea Friday to repay millions of dollars in loans provided in the form of food since 2000, the Unification Ministry said.

The impoverished North missed the June 7, 2012 deadline to repay South Korea US$5.83 million in the first installment of the $724 million food loan extended to the North in rice and corn. The latest call is the South’s fifth demand made on the North to repay its debt.

Seoul’s state-run Export-Import Bank (Eximbank) sent a message on Thursday to Pyongyang’s Foreign Trade Bank, calling for the repayment, Unification Ministry spokesman Kim Hyung-suk said in a briefing.

The South Korean bank also sent another message the same day, notifying the North of its forthcoming June 7th deadline to repay the second installment of $5.78 million, the spokesman said.

“North Korea should faithfully abide by what they previously agreed to with the South,” Kim said, calling for the repayment of food loans.

Amid a conciliatory mode under the liberal-minded late President Kim Dae-jung, Seoul started to provide food loans to the famine-ridden country, providing a total of 2.4 million tons of rice and 200,000 tons of corn from 2000-2007.

Under the deal, the North is required to pay back a total of $875.32 million by 2037.

Read the full story here:
S. Korea again asks North to repay food loans
Yonhap
2013-5-24

UPDATE 1 (2012-7-15):  South Korea claims the DPRK missed a deadline for explaining how it intended to repay South Korean “loans”. According to Yonhap:

North Korea missed the deadline Sunday for notifying South Korea of how it will repay millions of dollars in loans provided in the form of food in 2000, resulting in Seoul having the right to declare Pyongyang has defaulted on its debt, an official said.

South Korea sent the North a message on June 15 that the communist nation was supposed to have paid back US$5.83 million in the first installment of a 2000 food loan worth $88.36 million by June 7. The North was required to respond to the message in 30 days.

That deadline passed on Sunday with the North remaining silent, giving South Korea the right to declare the North has defaulted on the debt, according to a government official in Seoul.

But South Korea is unlikely to go ahead with the declaration any time soon as it would have little effect on the North. The communist nation remains largely outside of the international financial system and the prospect of national default is unlikely to force it to repay its debt.

Officials said they are considering sending Pyongyang a message again calling for debt repayment.

Widespread views are that it won’t be easy for the North, which is still struggling with food shortages, to pay back its debt, but officials said the country could repay the debt in kind as it did before. In 2007 and 2008, the North repaid some debt with $2.4 million worth of zinc ores.

After the two Koreas held their first-ever summit in 2000, South Korea provided the North with a total of US$720 million in loans of rice and corn until 2007. Including interest accrued on the loans, the North is required to repay some US$875 million by 2037.

Such aid has been cut off after the South’s President Lee Myung-bak took office with a pledge to link any assistance to the North to progress in international efforts to end Pyongyang’s nuclear weapons programs.

The Daily NK also covered the story.

ORIGINAL POST (2012-6-8): According to Yonhap:

North Korea has not shown any signs of repaying the loans South Korea extended in food grains since 2000 although the initial day of the scheduled repayment passed as of Thursday. The South Korean government provided North Korea grain loans worth US$725 million for seven years until 2007, including 2.4 million tons of rice and 200,000 tons of corn. The total principal and interest North Korea should repay for the next 20 years is estimated at $875.32 million.

North Korea was scheduled to pay South Korea $5.83 million by Thursday for the loans extended to it in 2000. Korea Eximbank, which is in charge of trade finance with the North, notified its counterpart the Chosun Trade Bank of North Korea of the repayment obligation Monday but North Korea had not responded of Friday.

The former South Korean governments led by President Kim Dae-jung and Roh Moo-hyun provided an estimated 1 trillion won (US$850 million) to North Korea from 2000 to 2007 under the sunshine policy. South Korea provided an additional 1.37 trillion won to North Korea to finance the construction of a light water reactor in order to suspend North Korea’s nuclear development. All the loans to the North were taxpayer’s money.

…

North Korea should show sincerity in the repayment of these loans for the sake of its future. If it fails to do so, the North will encounter substantial difficulties in accessing further loans from the international community. North Korea also has failed to repay loans it borrowed from the old Soviet Union. Russia reportedly had to reduce 90 percent of the Norths loans, worth $11 billion.

If North Korea has difficulties repaying its debts to South Korea in cash, it should sincerely discuss alternative measures to repay the loans with the South Korean government.

The South Korean government should positively consider measures to get the money back in kind, such as in mineral resources. North Korea should understand that if it fails to show the minimum sincerity on the repayment of its debts, it will experience much more difficulty in attracting economic assistance from the outside world.

The Choson Ilbo reports this additional information:

In 2007 and 2008, South Korea also gave the North $80 million worth of raw materials to produce textiles, shoes and soap. At the time, North Korea repaid 3 percent of the loan with $2.4 million worth of zinc ingots. Repayments of the remaining $77.6 million become due after a five-year grace period, so North Korea must start repaying $8.6 million a year every year for 10 years starting in 2014.

Seoul also loaned Pyongyang W585.2 billion (US$1=W1,172) from the Inter-Korean Cooperation Fund so it could re-connect railways and roads with the South that were severed in the 1950-53 Korean War. And it provided W149.4 billion worth of equipment to the North. The North must repay that loan in 20 years with a 10-year grace period at an annual interest of 1 percent.

It also seems unlikely that South Korea will be able to recoup W1.37 trillion plus around W900 billion in interest it provided North Korea through an abortive project by the Korean Energy Development Organization to build a light-water reactor.

The loans amount to a total of around W3.5 trillion, which the South will probably have to write off.

The Daily NK also reported on this story.

Read the full story here:
North Korea should show sincerity in repaying South Korea loans
Yonhap
2012-6-8

N.Korea Misses 1st Loan Repayment Deadline
Choson Ilbo
2012-6-8

Pictured above (Google Earth): Tudan Duck Farm

UPDATE 1 (2013-6-11): According to Yonhap (via Global Post):

North Korea has reported to the international agency on animal health that the country has seen no new bird flu cases since early last month, agency officials said Tuesday.

Ri Kyong-gun, the North’s agricultural department chief, said, in a report sent to the World Organization for Animal Health (OIE), “There are no new outbreaks” as of May 22, some 10 days after a duck farm near Pyongyang reported animals showing symptoms of avian influenza, known as the H5N1 virus.

While the source of the outbreak and its origin are not yet known, the communist country “humanely culled all ducks in the infected cages and has vaccinated 500,000 heads nationwide,” the official said in the report.

According to the comments there, weekly follow-up reports will be submitted, “as the event is continuing.” The May 22 report is the latest one available on the OIE website.

The international agency earlier said the highly contagious virus was presumed to be spread by migrating birds from China, where its Tibet Autonomous Region saw 35 chickens die at a farm after showing symptoms of avian flu.

In a move to conduct an on-spot inspection into the recent cases and to help North Korea with quarantine activities, three experts from the OIE and the Food and Agriculture Organization made a one-week trip to the communist country from June 3, the Washington-based Voice of America said.

An outbreak of the avian flu led to a mass cull of 210,000 chickens in North Korea back in 2005.

ORIGINAL POST: According to KCNA (2013-5-20):

DPRK Strives to Prevent Spread of Bird Flu Virus

Pyongyang, May 20 (KCNA) — The Democratic People’s Republic of Korea has been making big efforts to prevent the spread of the bird flu virus.

According to an examination made by the Central Epizootic Prevention Center and the Veterinary Institute under the Academy of Agricultural Science on May 7, it was found that ducks in the Tudan Duck Farm in Pyongyang were infected with the H5N1 virus by migratory birds. They briefed UN bodies concerned on this situation while taking steps to kill as many as 160 000 ducks in the farm and quarantine and disinfect it.

More than 1 360 veterinary epidemic control teams are now working throughout the country to keep a close eye on poultry and movement of wild birds. Efforts are made to raise the diagnosis capability of provincial epizootic prevention organs and increase preventive medicines.

Meanwhile, preventive measures are being taken against H7N9 virus under the direction of the State Emergency Anti-epidemic Committee. They include checkup of persons from the bird flu virus-hit areas, test and quarantine of poultry and restriction on movement of living fowls. A strict step was taken to hedge fowl, duck, pigeon and other domestic poultry off from the outer world.

Intensive hygienic information service is going on among inhabitants.

Additional information as the WSJ Korea Real Time.

According to Yonhap:

Eight out of every 10 North Korean families are suffering malnutrition with little access to protein foods, a U.S. media report said Tuesday.

In its survey of 87 North Korean families from January to March, the World Food Program (WFP) found that 80 percent of them were undernourished mainly due to a lack of protein intake, the Washington-based Voice of America (VOA) said.

About 38 percent of those surveyed were not able to eat high-protein foods during the one week before the survey, such as meat, fish, eggs or beans, said the report, monitored in Seoul.

Quoting the WFP report, the VOA said the North Korean families, on average, eat meat 1.3 days a week or beans 1.2 days per week.

The report also said about 14 percent of the 86 hospitalized North Korean children under age 5 whom its aid workers visited during the January-March period were in serious malnutrition conditions.

Meanwhile, AmeriCares, a U.S. non-profit aid group, is about to send 10.5 tons of drugs in humanitarian assistance to the North this week, another U.S. media report said.

The aid package, which includes antibiotics, stomach medicines and dermatology drugs, will be shipped later this week to six hospitals in Pyongyang and other areas, the Washington-based Radio Free Asia reported. The shipment will also include personal hygiene items like toothbrushes and soaps, it said.

The RFA said the latest aid has no political consideration and is solely for humanitarian purposes.

AmeriCares began its aid to the North in 1997 as the first American private group to do so. Last year, it sent US$7 million worth of medicine for flood victims in the impoverished country.

Read the full story here:
Eight out of 10 N. Korean families undernourished: report
Yonhap
2013-5-7

According to the Wall Street Journal:

At a courtesy call on the Mongolian president last week, Pyongyang’s new ambassador made a request for food aid, according to the official website for the head of state.

“North Korea may face (a) severe food shortage,” Ambassador Hong Gyu told President Elbegdorj, according to the account. Mr. Hong then asked for Mongolia to consider the possibility of delivering food aid to North Korea, the account said.

North Korea’s toughest part of the year for food begins in April and runs through September, when the annual corn harvest begins. Kwon Tae-jin, a scholar on North Korean agriculture in Seoul said that last year’s yield was moderate, but not sufficient to tide the country over.

“We’ve learned that while rations are being delivered, it varies region by region,” said Dr. Kwon, a director at the Korea Rural Economic Institute in Seoul. “But it isn’t sufficient to go around for everyone.”

Here is some information from the web site of the president of Mongolia:

Today, the Ambassador Extraordinary and Plenipotentiary from the Democratic People’s Republic of Korea to Mongolia Hong Gyu presented a letter of Credence to the President of Mongolia Ts.Elbegdorj. The ceremony of presentation of credentials was followed by brief reception organized in honor of new envoy. At the meeting President Elbegdorj said that this year is the 65th year anniversary of diplomatic relations between Mongolia and North Korea and noted that the bilateral relationship between the two countries will further strengthen. Mr. Hong Gyu conveyed the greetings of the Supreme Leader of North Korea, Kim Jong-un and mentioned of his invitation to visit North Korea. Also, Mr. Hong Gyu noted that North Korea is committed to intensify economic reform. In response, President Elbegdorj expressed Mongolia’s interest to share its experience of economic reform.

At the meeting, both sides exchanged opinion on enhancing partnership in sport and cultural sector and discussed possibilities to bring North Korean basketball, football team and judokas to Mongolia to prepare for the international competitions.

Mr. Hong Gyu said “North Korea may face severe food shortage. Therefore, we ask Mongolia to learn possibilities of delivering food aid to North Korea”.

Read the full story here:
North Korea Asks Mongolia for Food Aid
Wall Street Journal
Jeyup S Kwaak
2013-4-22