Archive for the ‘Political economy’ Category

China’s iron ore imports from North Korea in April highest since 2014

Tuesday, May 23rd, 2017

Benjamin Katzeff Silberstein

Reports Reuters:

China’s imports of North Korean goods in April fell below $100 million to the lowest in nearly three years, data showed on Tuesday, after China stopped buying coal from the isolated country and as calls mount for further economic sanctions.

Neighboring China is North Korea’s biggest trade partner, and the data indicates that China’s halt of North Korean coal imports on Feb. 26 is having an impact and curbing Pyongyang’s ability to raise hard currency through exports.

The world’s second-largest economy bought goods worth $99.3 million in April from North Korea, the lowest monthly tally since at least June 2014, according to Chinese customs data. Previous data was not available.

That compares with $114.6 million in March and $167.7 million a year earlier.

A fifth of the April total was iron ore imports, which hit 285,000 tonnes, their highest since August 2014. That was up 10 percent from a month earlier and 2-1/2 times higher than a year earlier.

U.S. President Donald Trump has been urging China to put more pressure on North Korea to step back from its nuclear and missile programs, and lavished praise on President Xi Jinping last month for efforts to do so.

At a regular briefing on Tuesday, Chinese Foreign Ministry spokeswoman Hua Chunying said Beijing’s actions were not aimed at proving anything to anyone else.

“This is our international obligation as a responsible member of the international community and permanent member of the U.N. Security Council,” she said.

Cho Bong-hyun, who heads research on North Korea’s economy at IBK Bank in Seoul, said China’s imports from North Korea were likely to continue to decline due to Pyongyang’s repeated missile tests and the suspension of coal shipments to China.

“This won’t be disastrous for North Korea, but it will obviously hurt North Korea because it tends to export goods to China worth around $3 billion per year,” he said.

The value of imports from North Korea has fallen month-on-month since December, the data showed.

CHINESE SALES DOWN AS WELL

China’s exports to North Korea eased to $288.2 million in April, down 12 percent from March. Exports for the first four months of the year were up 32 percent at $1 billion.

Diesel shipments to North Korea in April more than halved from March to 2,606 tonnes and gasoline sales dropped 6 percent to 13,496 tonnes. North Korea gets most of its oil needs from China.

Crude oil exports from China to North Korea have not been disclosed by customs for several years, but sources have put it at about 520,000 tonnes a year.

Cutting off oil to North Korea for an extended period would be a crippling measure that analysts have said they don’t expect China would take.

Pyongyang does not publish economic data.

North Korea fired a ballistic missile into waters off its east coast on Sunday, the second test in a week in defiance of United Nations Security Council resolutions.

In a statement posted on Tuesday, Chinese Foreign Minister Wang Yi urged North Korea not to violate U.N. resolutions on its nuclear and missile programs.

Washington has weighed tougher economic sanctions on Pyongyang, including an oil embargo, a global ban on its airline, intercepting cargo ships and punishing Chinese banks that do business with Pyongyang.

Full article:
China’s imports from North Korea sink as coal ban bites
Josephine Mason
Reuters
2017-05-23

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Ten million live in food insecurity in North Korea, UN says. But what does that really mean?

Tuesday, May 16th, 2017

By Benjamin Katzeff Silberstein

A new report published by World Food Program and other UN institutions (Food Insecurity Information Network), detailing food insecurity in the world in 2016 as a whole, says the following about the situation in North Korea:

  • 4.4 million (or 17 percent of the North Korean population as a whole) is in “crisis, emergency and [or?] famine”.
  • 5.6 million (or 22 percent of the population) lives in a “stressed” situation when it comes to food.
  • This brings the entirety of the population living in food insecurity to ten million.

North Korea is the only country in all of East Asia with food insecurity, the report says.

It is unclear where the data comes from. According to the report, it could either have come from government sources in North Korean or from the World Food Program, but the report itself does not specify this.

A few things are worth noting. First and most importantly, particularly at a time when news reports abound about the rising middle classes and the new consumption habits of the wealthy, it is crucial to remember that a significant proportion of the North Korean population still live lives far away from the relative luxury of Pyongyang.

Second, though there is no reason whatsoever to doubt that a significant part of the North Korean population lives in severe hardship, harvests do not appear to be declining. On the contrary. According to the WFP’s 2017 needs assessment for North Korea,

“[w]hile official Government harvest data for 2016 has not yet been released, FAO estimates that rice production in 2016 increased by 23 per cent compared to the previous year when there was drought, but remains below the previous three-year average.”

Third, the World Food Program’s methodology for estimating these figures is rather unclear and problematic. For example, in the above-mentioned assessment of North Korean needs and priorities for 2017, released earlier this year, the WFP classifies all those depending on the Public Distribution System (PDS) as “suffering from food insecurity and undernutrition, as well as a lack of access to basic services.”

Presumably, this is derived from the fact that PDS distribution (of grains and staple foods, which is basically all it distributes) fluctuates through the year and is fairly unpredictable. But with the growing prevalence of the markets, it is unclear whether even those who the WFP claim “depend” on the PDS, really get the main portion of their food from the system. Over the past few years, public distribution of food has become an increasingly marginal (though certainly not unimportant) part of the food supply, and assuming that 18 million North Koreans experience food insecurity simply because they are beneficiaries of the public distribution system seems questionable at best. Obviously, the only way to understand food security overall would be to look at sources of food overall, not just one channel of supply.

Fourth, one overall problem with data on food security in North Korea remains the involvement of the North Korean government in the data collection. That is not to say that the North Korean government pushes the food production estimates upward to make itself look more successful. On the contrary, at times it probably exaggerates food needs in order to receive more outside assistance. Rather, the political nature of food, markets and the economic system makes it difficult to get trustworthy assessments of the food situation in the country. Only in one paragraph in its short version of North Korea’s needs estimates for 2017 does the World Food Program even allude to the markets:

In addition to the PDS, households are increasingly reliant on markets for their foods, except cereals. Farmers’ markets are distribution channels for a wide range of foods and basic necessities. In addition to swaps and bartering, markets involve large numbers of small transactions, often led by women.
Markets enable households to sell produce from their kitchen gardens; vegetables, maize and potatoes, as well as some small livestock.

Given the extent to which marketization has prevailed in North Korean society for over close to three decades, language like this seems to conflict with an overwhelming body of information about the centrality of the markets in the system today.

And, of course, there is the elephant in the room: North Korea’s economic system itself. As Amartya Sen famously pointed out, famine and food insecurity does not first and foremost stem from a lack of food overall, but from skewed entitlements. In other words, resources exist, but the problem is who gets them. In North Korea, the regime continues to refuse overarching and fundamental reforms of the economic system. As Fyodor Tertitskiy convincingly argued in a recent piece in NK News, the systemic changes in the North Korean economy of the past few years is most likely the work of bureaucrats within the state hierarchy, rather than a push by Kim Jong-un. In short, there are a lot of things the regime could change about the economy, to improve access to food and diminish food insecurity, but which it does not do.

This makes language like this, also from the WFP’s 2017 needs assessment, so problematic (my emphasis):

There are many complex, intertwined reasons for the high rates of undernutrition in DPRK, including challenges in producing sufficient food. The majority of the country is mountainous, only 17 per cent of land is good for cultivation.
Agriculture also remains dependent on traditional farming methods. Food production is hampered by a lack of agricultural inputs, such as quality seeds, proper fertilizer and equipment. In addition, changing weather patterns have left DPRK vulnerable to droughts and floods, which have affected agricultural production.

Mountains and bad weather are not factors unique to North Korea. Geography is not destiny, and there is no shortage in the world of countries that have overcome difficulties in their natural environment through good policy. One has to understand the difficult spot that the WFP and other UN institutions work in, given North Korea’s politically sensitive and tense context. But one can only hope that the WFP is clearer about pointing out systemic deficiencies in the North Korean economy when they talk to officials behind closed doors, than they are in public statements.

All this said, North Korea is an extremely difficult environment to navigate for international aid organizations. The women and men on the ground certainly do their best to accomplish good things, and make accurate measurements in a challenging environment. But it is important to keep these and other methodological issues in mind before drawing any major conclusions about North Korea’s food situation.

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Chinese imports of North Korean goods down by 35 pct in March 2017

Wednesday, April 26th, 2017

Benjamin Katzeff Silberstein

Yonhap reports a 35 percent drop in Chinese imports from North Korea in March this year, compared to February, citing decreased coal imports after the February ban as a reason:

Imports from North Korea declined to US$114.56 million last month from $176.7 million tallied the previous month, according to Chinese customs data.

In late February, China suspended North Korean coal imports through the end of the year in accordance with the U.N. Security Council resolution adopted in December to punish Pyongyang for its fifth nuclear test in September.

The resolution centers on putting a significant cap on North Korea’s exports of coal — the country’s single biggest export item and source of hard currency. The cap was set at whichever is lower between 7.5 million tons or $400 million.

North Korea heavily relies on coal exports to China for its foreign currency income. China imported $1.19 billion worth of coals from North Korea last year.

Full article:
China’s imports of N. Korean goods fall 35 pct in March
Yonhap News
2017-04-25

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Some coal transports to China continue, while some controls tighten, Daily NK says

Wednesday, March 1st, 2017

Benjamin Katzeff Silberstein

Daily NK reports that coal smuggling continues despite the Chinese import suspension. Presumably, the suspension would also imply tighter controls on smuggling operations, some of which likely goes on with a degree of knowledge on the side of the authorities:

Although China’s Ministry of Commerce previously announced the suspension of coal imports from North Korea until the end of 2017, coal trading has continued in Rizao Port, Shandong Province, where regulatory control is known to be relatively loose. However, as of February 23, the customs clearance process was reportedly also strengthened in this region, leading to speculation that the coal trade will likely be curtailed in Rizao as well.
“Even on February 20, the day after the announcement to suspend North Korean coal imports, a vessel loaded with North Korean coal was permitted to unload after passing quality inspection at Rizao Port. Although official coal imports from North Korea have all been stopped, coal shipments have been continually imported through Rizao Port while circumventing customs clearance,” a source close to North Korean affairs in China told Daily NK on February 23.
“The North Korean trading companies have already signed contracts for coal trading in the first half of 2017, so they have no choice but to continue shipping in order to receive foreign currency. But the regulations have been strengthened as of today, so all coal is supposedly banned from entering China,” the source added.
To date, North Korean coal has been primarily exported by ships traveling through Nampo Port to Rizao Port, or from Songrim Port in North Hwanghae Province to Dongjiang Port in Dandong or Dalian. The coal is then sold to regions in southern China after passing quality inspection.
“The Chinese companies are obliged to import North Korean coal to secure their sales volumes. The coal trade between China and North Korea is mostly between individual merchants, so they are continuing to engage in smuggling, ignoring diplomatic pressure and sanctions,” the source said.
“When sanctions were imposed in earnest in April last year, the North Korean trading companies overcame the restrictions by changing their trading ports.”
However, in Dongjiang and Dalian, which are close to the border areas and where international attention is concentrated, the regulations imposed by Chinese customs offices are known to be strict.
“Rizao Port is relatively looser with their regulations than Dongjiang Port and Dalian Port because it mostly handles freight. The traders have resorted to Rizao Port in the face of sanctions because they can trade coal without going through the customs clearance process,” a separate source in China with ties to the coal industry reported.
“Even if the UN Security Council and the Chinese authorities tighten regulations on the coal trade, it cannot last long. Coal trading agreements are made between trading companies solely based on profit, so they are bound to create an alternate route whenever sanctions are introduced.”
“The traders can falsify records for coal and document it as other goods, or can borrow vessels belonging to other countries. The UN sanctions are currently ineffective for the land border between China and North Korea, which stretches for over 1300 km, so it will be impossible to block all coal smuggling via sea, which covers a far larger area,” he concluded.

Full article:
North Korean coal smuggling continues despite China’s import ban
Seol Song Ah
Daily NK
2017-02-27

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China says it is suspending imports of North Korean coal for the rest of the year

Saturday, February 18th, 2017

By Benjamin Katzeff Silberstein

In yet another so-called “strong signal”, China’s commerce ministry said on Saturday it won’t be importing any more coal from North Korea for the rest of the year. Remember, that coal that was already basically supposed to not be imported after last year’s sanctions (save for that generating revenue for humanitarian purposes). And the imports of which was already supposed to be capped at a low monetary limit. And so on and so forth.

Of course, as a usual caveat this time could be different but whether or not this decision will be enforced, and how strictly, remains to be seen, to put it mildly. China has other concerns in its relationship with the Korean peninsula and North Korea than signalling its commitment to the international community. Moreover, as I have written before, there are many factors that impact Chinese imports of North Korean coal than central government decisions. Domestic demand is one, and has probably played a greater role than diplomatic considerations over the past few years.

Other than the missile launch, one could suspect this is also a signal against the killing of Kim Jong-nam, who lived under Chinese protection.

Yonhap:

China’s commerce ministry said Saturday it will suspend the import of North Korean coal, apparently in response to the latest provocations made by Pyongyang.

Beijing’s Ministry of Commerce said the decision, which comes into effect on Sunday, is in line with the United Nation’s sanction against North Korea. The suspension will be valid through Dec. 31, the ministry added.

“As coal takes up a significant portion of Pyongyang’s trade with China, the decision is anticipated to have a significant impact on North Korea,” an expert on China said.

Coal is estimated to take up 40 percent of North Korea’s exports to China.

China had banned imports of coal from North Korea in April last year, but had been making exceptions for those intended for household use, which led to criticism over the regulation’s effectiveness.

North Korea fired a new intermediate-range ballistic missile (IRBM) called the Pukguksong-2 on Sunday from an air base in the country’s northwestern province toward waters off its east coast.

Full article:
China suspends imports of N.Korean coal
Yonhap News
2017-02-18

(Update 02-19-2017): an analysis from Choson Exchange:

When the UN Security Council imposed the cap on coal trade, China was left with the question of how such a cap could be implemented. Would there be an auction system for quotas? Is it able to track forward contracts or does it only know belatedly the level of coal trade after import figures come out? This problem came to the fore last year when the Chinese were unable to meet their commitments regarding the import cap as they wrestled with these problems.

China has generally chosen to ensure adequate flexibility in the wording of UNSC sanctions to give it wiggle room, rather than outright violating those rulings. Allowing a coal cap to pass at the UNSC indicates their willingness to adhere to the ruling. In imposing a ban for 2017, China probably took into account rapidly rising coal prices and a probable rush by companies to frontload sales ahead of the cap to predict that the coal cap would be breached far earlier in the year. Rather than risk a violation of the coal cap limit, China is proactively clamping down on trade.

Domestic concerns might also play a part. China is restricting domestic production of coal. Between domestic producers and North Korean ones, China obviously prefers the former.

Full article:
Why China imposed a ban on North Korean coal imports
Choson Exchange blog
2017-02-19

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North Korean rice prices have dropped drastically one year after the sanctions. Why?

Wednesday, February 8th, 2017

By: Benjamin Katzeff Silberstein

Prices for rice have fallen in North Korea. Daily NK, which tracks prices of rice and foreign currency in three North Korean cities, reported in the beginning of this week that rice prices have fallen thanks to continued development of the market economy and a steady flow of goods to and from China. This has happened despite expectations that the sanctions that the UN passed one year ago would cause inflation.

In theory, the sanctions were supposed to curb trade with China because they targeted North Korea’s crucial minerals trade. In practice, a steady stream of news from the border suggests that trade has continued, albeit with periodic squeezes, following a familiar pattern of China’s sanctions implementation waxing and waning.

This makes a lot of sense. A better functioning and more efficient market should logically lead to lower prices, as should increased trade with China, given the increase in supply. But neither of these two factors explains the timing. There are several other elements to take into consideration when analyzing price changes in North Korea. I am not making any certain claims here about the relatively drastic shift in prices, but rather, pointing to a few factors that may have contributed.

First, one must ask: how big is the drop? The short answer is: pretty big, but not unprecedented. The following graph shows the last and first price observations in the Daily NK market prices database for every year since 2010–2011. (I’ve excluded 2009–2010 because of the distortions that the 2009 currency reform creates in the data.) It shows that a similar price drop happened between 2011 and 2012 as well.

Graph 1: rice prices in North Korea, last and first year observations. Graph by NKeconwatch.com. Data from Daily NK.

This latest price point, however, is not a historic low-point. We’ll see if prices continue to drop over the weeks, but as of now, there are fairly near time points when prices have been lower, such as April 2014 (see graph further down).

Prices are seasonal to a degree. Though the market system and the public distribution system (PDS) obviously function under very different mechanisms, the following graph from the World Food Program’s 2013 food and crop assessment (the latest exhaustive one they published, to my knowledge) underscores the point that supply varies depending as the harvest draws farther and closer, and suggests that overall supply tends to be particularly good in December and January in other years as well:

Figure copied from World Food Program Food and Crop Assessment in the DPRK, November 2013, showing seasonal variations in government grain distribution.

Overall, the story under Kim Jong-un’s tenure seems to be one of price stability. Since around the spring of 2014, prices have moved in a fairly delineated fashion (as visible in the right half of this graph):

Rice prices, average of three cities, 2012–2017. Data from Daily NK, graph by NKEconwatch.com.

Second, though it would be intuitively easy to conclude that the drop in prices was caused by better functioning market mechanisms and agricultural management changes, this doesn’t seem to be the whole story. Again, such changes are crucial and may well have played a large role in the greater price stability of the past few years. But they would not explain this sudden shift.

Instead, the story seems to partially be the opposite, one of government action. A few days ago, Voice of America reported that PDS distributions in January of this year have, according to a World Food Program official, gone up by around ten percent as compared to the same period last year. Both in September and November, the North Korean government imported significantly larger quantities of rice than usual. These imports presumably go out through state channels rather than the private markets.

So while it’s impossible to isolate different effects from one another, it looks like the state can still have a significant impact on the food economy, even with the strong and continuously evolving market sector. This impact seems particularly likely this time around, given the sudden drop in prices. Only time will tell whether drop continues, or if prices continue to bounce within the limits of the past few years.

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Private ownership of cars in North Korea

Tuesday, January 31st, 2017

By Benjamin Katzeff Silberstein

Yonhap reports (citing Joongang Ilbo) that since last year, private North Korean citizens are able to register ownership of cars formally and legally. The headline is slightly misleading – visitors and pictures from Pyongyang and other large cities have long since showed a vast increase of cars in the country, so their existence there is itself nothing new. However, if a change has occurred in ownership structures to make an already prevalent practice formally legal, it follows along with a trend over the past few years where practices already taking place are further incorporated into a formal legal framework:

Under civil law, North Koreans are allowed to possess cars and bequeath or inherit them, but in reality, people register cars under the name of organizations, not under the name of individuals.

Local newspaper JoongAng Ilbo reported that ordinary North Koreans have been permitted to register cars in their names since late last year, a move that heralds the recognition of private ownership.

The Ministry of Unification, which handles inter-Korean affairs, said more North Koreans are moving to own vehicles for personal use.

Full article:
N. Koreans showing inclination to possess cars: unification ministry
Yonhap News
2017-01-31

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More North Korean coal shipments going into China, says VOA/Yonhap

Wednesday, January 4th, 2017

By Benjamin Katzeff Silberstein

As in the past, Chinese sanctions enforcement appears to have been a waxing and waning phenomenon. Yonhap reports, citing Voice of America:

China seems to have resumed imports of North Korean coal by lifting a temporary ban on them which it employed early last month, a U.S. broadcaster, monitored here, reported Wednesday.

On Dec. 11, China’s Commerce Ministry announced that it would ban imports of North Korean coal through the end of that month to comply with the U.N. Security Council Resolution 2321 adopted on Nov. 30 to punish the North for its fifth nuclear test. Coal is the North’s single largest export item, and China accounts for nearly 40 percent of the shipments.

Three North Korean vessels — Kumreung No. 5, Kumsan and Wonsan No. 2 — are confirmed to have moored in seas about 10 kilometers off the China’s leading coal port of Qinhuangdao, Hebei Province, from Sunday through Tuesday, the Voice of America said, citing MarineTraffic, which provides live ship tracking intelligence worldwide.

On top of that, North Korean ships Kumhae and Kumho No. 1 berthed at the ports of Longkou and Penglai, Shandong Province, respectively, and Susong and Jonwun No. 68 were also on standby for entry near the ports, the broadcaster said.

Eight other North Korean boats were anchored in seas near Yantai, Rizhao and Lanshan, Shandong Province.

The ships, which are believed to have left the North starting Sunday and arriving in the Chinese ports on Monday or Tuesday, are bulk carriers capable of transporting coal, the broadcaster said, citing MarineTraffic.

Satellite images show heaps of black objects at the Chinese ports without exception, it said.

The Resolution 2321 is aimed largely at significantly curtailing the North’s coal exports — a source of hard currency for its nuclear program — by putting a cap on its total export amount.

The cap, set at whichever is lower between 7.5 million tons or US$400 million, is aimed at cutting the North’s annual coal export revenue by more than 60 percent or about $700 million, a huge sum that accounts for nearly a quarter of its total exports estimated at $3 billion.

Article source:

China appears to have resumed imports of N. Korean coal: VOA
Yonhap News
2017-01-04

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Kim Jong-un’s 2016 Acitivites

Saturday, December 31st, 2016

According to Yonhap:

North Korean leader Kim Jong-un carried out the fewest public activities this year since he took office in late 2011, data showed Saturday, amid toughened international scrutiny over Pyongyang’s nuclear and missile tests.

The North’s leader conducted 132 field guidances in 2016, compared to 153 cases recorded the previous year, according to Seoul’s unification ministry and analysis of North Korean media reports by Yonhap News Agency.

Since his public appearances peaked at 212 in 2013, they have been on the decline, the data showed.

According to my data (which are slightly different from Yonhap’s), here are the total number of Kim Jong-un’s guidance trips since taking power:

2012: 150
2013: 223
2014: 173
2015: 157
2016: 140

The Yonhap article speculates that the decline in activity is due to foreign observation of his activities. However I completed disagree with this assessment.

You can read the full story here:
N.K. leader’s public activities hit 5-year low in 2016: data
Yonhap
2016-12-31

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The size of North Korea’s market economy, and why it matters

Saturday, December 10th, 2016

By Benjamin Katzeff Silberstein

The other day, South Korean think-tank KINU (Korean Institute for National Unification) reportedly claimed that North Korea has 404 official markets in total. As Curtis Melvin has already pointed out on twitter, the real number is actually higher, but all this depends on what precise definition you use of markets (institutionalized and government recognized, versus operating in a legal gray zone, et cetera). As this report by the U.S.-Korea Institute laid out last year – also using satellite imagery, like the KINU report does – markets have grown significantly in size since the early 2000s.

The more interesting figures, in my opinion, are KINU’s estimates for what the markets actually generate in terms of income for the government, and how many people they employ. Below, I place these figures in a comparative perspective within the economy as a whole, and discuss the proportional weight of the markets in the North Korean economy. But first, some of the usual caveats:

As with any figures relating to the North Korean economy, a great deal of caution must be exercised in approaching these numbers. It would seem nearly impossible, for example, to accurately calculate the number of people employed by the markets. In theory, this should not be that hard. Using Google Earth, you can measure, with a fair degree of accuracy, the size of the trading grounds, and knowing the rough size of the average market stall in a North Korean market and how many people work in each one, getting a rough number for the amount that they employ should not be impossible. It would be a very rough estimate but arguably that is better than nothing. But in practice, it would still not give the full story of how many people work in the markets, since many people work there part-time, at least according to (possibly outdated) anecdotal evidence.

Moreover, it is important to remember that the market system is not the entire private sector – many other types of exchanges and transactions go on in the North Korean economy, not all recognizable from above, in complexes such as residential buildings and the like, where small business have been known to operate from. So any number for government revenues, it is important to bear in mind, will only be an estimate (again, a very rough one) for the specific type of markets that KINU has recorded. KINU does not seem to have made its report available online yet – perhaps their methodology is laid out clearly enough to answer some of these questions.

What do the numbers tell us?

Still, the numbers are interesting as starting points for a broader analysis of the proportions and size of the North Korean economy. Starting with the number of individuals employed within the market system, KINU puts the number at 1.1 million. This is about 1/25 of the entire population of the country, as derived from the 2008 census. Table 34 (page 187 and onward) gives the total working-age population as approximately 17.37 million. Subtracting the share of the population listed as “studying,” we get around 16.4 million. Further subtracting the share of the population listed as “retired,” which arguably we shouldn’t do since elderly North Koreans are known to be significantly involved in market activities, we get approximately 13.3 million individuals. I do not subtract the share listed as “doing housework” simply because it seems far too unlikely that such a category in North Korea would really be excluded from the market labor force.

Just assuming as a theoretical experiment that KINU’s figures and the census numbers are accurate, we get a 7.5 percent share of people employed in the official market sector. In reality, the share may well lower since many people in the demographic groups subtracted are known to be involved in market activities. Conversely, it may be higher if KINU’s number does not take part-time workers into account or otherwise underestimates the number of market workers. Wheher or not one thinks this to be a high or low number is a matter of perspective. For comparison, the share of the labor force employed in retail trade in the United States was 10.2 in 2014.

Another interesting figure KINU gives is that for government revenue from the markets. Again, this, too, should not be hard to estimate in theory: if you approximate the amount of market stalls through satellite imagery and multiply the amount by the fee paid by each trader to the government, it shouldn’t be impossible to get a rough estimate for how much the trade brings the government. But of course, here, too, complications abound: when looking at markets from above, it is nearly impossible to determine exactly how large the actual trading grounds are, for example, and how much is made up of administrative and storage facilities. Still, an approximate estimate is immensely valuable as a starting point for a broader debate.

According to KINU, the North Korean government collects between $13 and $17 million per day in fees from market traders. Ever since 2003, the North Korean market regime has become increasingly formalized and incorporated into the official economy. This trend has reportedly continued under Kim Jong-un as well, and arguably accelerated during his tenure. This is clearly a wise move from a policy perspective: the government needs the markets and it needs the revenue, and their depiction as a threat to the regime may not be the full story.

Using the low number of $13 million gives us a figure of $4.7 billion in revenue per year, while the higher figure of $17 million gives $6.2 billion per year. Both the low- and the high-end estimates would put government revenues from market fees at a significantly higher figure than, for example, North Korea’s trade with China. In 2015, for example, North Korea’s exports to China estimated a total of $2.95 billion. The latest sanctions additions are estimated to take off around $700 million from North Korea’s export incomes. It is important to remember that even if they were to accomplish that, which remains doubtful, North Korea still has a domestic economy that matters greatly too. And remember – these are only estimated (estimated!) figures for government revenue from a specific type of market. They do not represent the entire private sector in North Korea.

So, while the role of exports should not be underestimated, it is important to remember that North Korea has a domestic economy of considerable size. Perhaps whatever pressure the sanctions applies on the North Korean economy could serve as an argument for those in the policy bureaucracy pushing for economic reforms that could further let the private economy develop.

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