North Korean Economy Watch

According to KCNA (2012-1-25):

The gross industrial output value grew 1.2 times for twenty days of January this year as against the same period last year.

This is the result of the high-pitched drive waged by all the workers of the country since the first day of this year after receiving with excitement the joint calls of the Central Committee and the Central Military Commission of the Workers’ Party of Korea, the joint New Year editorial for this year and the letter of the working people in South Hamgyong Province.

In the period, the Ministry of Light Industry increased the production 1.4 times and the Ministry of Food and Daily Necessities sharply boosted the production.

Thermal and hydropower stations have increased the ratio of operating the generating equipment.

Much effort is being concentrated on supplying coal to the thermal power plants and chemical and metal plants and developing more coal beds.

The Ministry of Coal Industry produced 12,000 more tons of coal than planned for the 20 days.

Iron mills and steelworks also increased the production.

The freight transport volume increased by 12 percent from the same period last year.

Innovations were made in the production of vinalon and fertilizer by the industrial establishments in the field of chemical industry and in the production of custom built equipment and mining machines by the industrial enterprises of the field of machine industry.

The forestry stations and pit wood stations increased the timber production.

Progress has been reported on a daily basis from the important projects including the building of apartments in Mansudae areas and the Paektusan Songun Youth Power Station.

For the uninitiated, this is about as close as the DPRK gets to releasing economic statistics. Note there are no base numbers–only [some] % increases. Also, despite the measure being officially named “output value”, it is really just a claim of increased physical production.  There is no value (prices) or mention of “services” included in these measures.

Unfortunately without more solid numbers, and the proclivity to ascribe productivity gains to effective propaganda, these reports cannot be taken seriously.

Although we all talk about the DPRK’s GDP and per capita income as if the numbers are solid, the reality is quite the opposite.  In addition to the general lack of information, there are all sorts of methodological problems with assessing the value of the DPRK’s economy.  Here are some helpful sources if you want to learn more:

1. DPRK Economic Statistics Report

2. G. Warren Nutter papers:

- (JSTOR) “Soviet Industrial Growth”, Source: Science, New Series, Vol. 130, No. 3370 (Jul. 31, 1959), pp. 252-255

-(JSTOR) “Industrial Growth in the Soviet Union”, The American Economic Review , Vol. 48, No. 2, Papers and Proceedings of the Seventieth Annual Meeting of the American Economic Association (May, 1958), pp. 398-411

-(JSTOR) Some Observations on Soviet Industrial Growth”, The American Economic Review , Vol. 47, No. 2, Papers and Proceedings of the Sixty-eighth Annual Meeting of the American Economic Association (May, 1957), pp. 618-630

3. The North Korean Economy by Nicholas Eberstadt

4. Assessing the economic performance of North Korea, 1954–1989: Estimates and growth accounting analysis

5. Bank of Korea’s assessment fo the DPRK economy in 2010.

6. My North Korean Economic Statistics Page

According to Yonhap:

The joint South-North Korean industrial complex in the North’s border city of Kaesong saw its production expand 14.4 percent in 2011 from a year earlier, Seoul’s unification ministry said Monday.

The total production at the Kaesong Industrial Complex reached US$369.9 million during the January-November period last year, up from $323.3 million worth of production for all of 2010, according to the Ministry of Unification.

The output during the last month of 2011 has not been tallied yet, the ministry said, adding the on-year growth rate may be far greater.

Production for the first 11 months of 2011 marks a 25.7-percent growth from the same period in the previous year, the ministry also noted.

Monthly production hit $31.1 million in January last year and hovered near the $30-million mark every month last year, except in February, according to the ministry.

The ministry attributed last year’s output growth to an increasing number of workers at Kaesong.

North Korean laborers working at the complex reached a peak of 48,708 as of November last year, the ministry said. The comparable figure at the end of 2010 was 46,284, it said.

Yonhap also reports the following:

The provision of new laborers is seen as a signal of the new North Korean leadership attempting to maintain the joint industrial complex, the symbol of inter-Korean economic cooperation, despite the North’s repeated denunciations of the Lee Myung-bak administration for allowing only a former South Korean first lady and a businesswoman to visit Pyongyang to mourn Kim’s death.

“North Korea will provide about 400 more laborers to the Kaesong Industrial Complex on the 26th (of January) immediately after the Lunar Yew Year’s holiday,” a source at the Kaesong complex said.

A Unification Ministry official also said that he “heard that North Korea will soon increase the laborers at the Kaesong Industrial Park.”

The North had planned to increase the number of North Korean laborers late last month but suspended the plan due to the sudden death of Kim on Dec. 19.

Hundreds of South Korean factories in the industrial park employ 48,708 North Koreans as of the end of November last year, up 2,400 from a year earlier.

Read the full stories here:
Production at joint industrial Kaesong park expands 14.4 pct in 2011
Yonhap
2012-1-23

N. Korea to provide 400 new laborers to S. Korean firms in Kaesong: sources
Yonhap
2012-1-24

Radio Free Asia posted the following information:

The latest UN statistics showed that in 2010, North Korea imported 430,000 mobile phones from China, its primary ally and biggest trading partner, a six-fold jump from imports the previous year.

North Koreans forked out U.S. $35 million to buy these mobile phones, six times more than the money spent in 2009, according to the UN figures.

At the same time, Koryolink, North Korea’s only 3G mobile phone network operator, saw a rapid increase in subscribers—from about 90,000 at the end of 2009 to 430,000 a year later and more than 800,000 in the third quarter of 2011, according to majority owner Egypt’s Orascom Telecom.

While the rapid increase in mobile phone users is allowing greater communications within and outside the country, there are various restrictions in usage and it does not signal any major opening up of North Korea, experts told RFA.

Read the full story here:
Cellphones No Signal Of Reforms
RFA
2012-1-19

According to the Daily NK:

There has been an upswing in prices and exchange rates in North Korea as East Asia moves towards the lunar New Year’s holiday, which falls on the 23rd.

A source from Hyesan in Yangkang Province told Daily NK this afternoon, “The number of people in the jangmadang is rising and trade is getting more active, and so the Yuan exchange rate and rice price are both on the up.” According to the source, the Yuan is trading for 680 North Korean Won, while rice is hovering at approximately 4,300.

A source from Musan in North Hamkyung Province previously reported similar circumstances to Daily NK on the 16th, with the Yuan at 780 Won and rice and corn at 4,500 Won and 800 Won respectively in the jangmadang there.

The current situation follows on from a price spike before Kim Jong Il’s death on December 17th [see here and here], the following mourning period (to the 29th) and criticism sessions (to January 8th). However, while at its height last month the price of the most expensive rice had hit 5,000 Won, by January 11th-14th it had declined to 3,000-3,500 Won in eastern regions. Now, however, with the holiday period ahead, prices are rising again.

“Although the self-criticism period ended, we still had to keep an eye on the security forces so the number of sellers in the jangmadang was what it used to be, but from a few days ago people started using the jangmadang as normal and the rice and Yuan prices started rising a bit,” the Hyesan source explained.

Interestingly, while the authorities have tried a number of measures to regulate the Sino-North Korean border and limit the use of foreign currency of late, sources report that the measures have only had a minor effect on prices and have not daunted the will of local people to trade at all.

Overseas currency is even being traded publicly somewhat more frequently now, sources report, showing the skepticism with which the people view official threats to stop the use of Yuan and U.S. Dollars in the market.

As the Musan source commented wryly, “People are saying that ‘If his dad couldn’t stop it, what is the young one going to do about it?’ and ‘As long as the Tumen River keeps flowing, they can’t stop the Yuan, the smuggling, or the defection.’”

Read the full story here:
New Year Seeing Active Trade
Daily NK
Lee Seok Young
2012-1-18

According to Business Week:

North Korea’s trade expanded more than 20 percent in 2010 to $6.1 billion on growing business with China even as the economy shrank for a second year, South Korea’s national statistics office said.

Trade volume increased 22.3 percent in 2010 after a 10.5 percent decline in 2009, Statistics Korea said in its annual report today in Seoul. Commerce with China accounted for 57 percent, or $3.5 billion, of North Korea’s foreign trade, up from 53 percent in the previous year. The totalitarian state doesn’t report economic statistics.

North Korea’s gross domestic product contracted 0.5 percent to 30 trillion won ($26.1 billion) in 2010, compared with South Korea’s 1,173 trillion won, the Bank of Korea said in November. Per capita income was 1.24 million won compared with South Korea’s 24 million won.

Kim Jong Un took over as leader of North Korea in December after the death of his father, Kim Jong Il. The regime has relied on economic handouts since the mid-1990s and an estimated 2 million people have died from famine, according to South Korea’s central bank. The United Nations and the U.S. increased sanctions on the country aimed at curtailing its nuclear weapons program after 2010 attacks that killed 50 South Koreans.

Chinese aid to the stricken country will probably increase as the government in Beijing seeks to avoid a flood of refugees from crossing the 880-mile (1,416 kilometer) border it shares with North Korea, analyst Dong Yong Sueng said. While food shortages have contributed to rising defections, North Korea has shown no willingness to ease sanctions by abandoning its nuclear weapons program.

Economic Dependence

“North Korea’s economic dependence on China will inevitably increase for the time being unless there’s some resolution to the nuclear situation,” said Dong, a senior fellow at the Samsung Economic Research Institute in Seoul. “China wants a stable North Korean regime and succession to avoid a potential influx of refugees.”

North Korea had a shortfall of as much as 700,000 metric tons of food last year, which could affect a quarter of the population, according to the United Nations Food & Agriculture Organization. China provides almost 90 percent of energy imports and 45 percent of the country’s food, according to a 2009 report from the New York-based Council on Foreign Relations.

China is preparing to consent to a North Korean request to provide 1 million tons of food in time for the April 5 anniversary of the birth of the country’s founder, Kim Il Sung, Japan’s Fuji Television said on its website. The report didn’t say where it obtained the information.

Providing Assistance

Chinese Foreign Ministry spokesman Liu Weimin today told reporters in Beijing that while he wasn’t aware of the report, “we have always been providing assistance to the DPRK within our capacity which we think will be conducive to the stability and development of the country.” DPRK is an acronym of North Korea’s formal name, the Democratic People’s Republic of Korea.

Kim’s military had over one million soldiers in active duty and 7.7 million reserve troops as of November 2010, today’s report said, citing South Korean Defense Ministry figures. The North operates under a military-first policy and has remained on combat alert since the Korean War ended in 1953 with a truce and not a peace treaty.

North Korea’s population rose to 24.2 million in 2010 from 24.1 million in 2009, about half of South Korea. Inter-Korean trade rose 13.9 percent from a year earlier to $1.9 billion last year, Statistics Korea said.

South Korea plans to set up a fund to raise as much as 55 trillion won to pay for eventual reunification with North Korea, Unification Minister Yu Woo Ik said in an interview with Bloomberg last October.

Read Sangwon Yoon’s full article in Business Week here.

The data in this article was pulled from a recent publication by Statistics Korea (Korean, English). You can read a press release of the publication here (in Korean). You can read the press release in English here (via Google Translate). It is not very good, so if a reader would care to take the time to translate this article, I would appreciate it. You can also download the press release as a .hwp file at the bottom of the article (download a .hwp reader here).

Statistics Korea did set up a North Korea Statistics page which you can see here. Unfortunately, it is only in Korean! I have, however, added it as a link on my North Korean Economic Statistics page.

UPDATE 1: The Daily NK also covered this story with the following report:

The income gap between North and South Korea is becoming ever wider, according to statistics released yesterday by Statistics Korea showing that South Korea’s per capita Gross National Income (GNI) in 2010 was $27,592, 19.3 times that of North Korea at $1,074. Last year the gap was 18.4 times.

In the (legal) foreign trade sector, the two Koreas also lived very differently. South Korea’s 2012 trading volume was $891.6 billion, 212.3 times North Korea’s $4.2 billion. North Korea’s exports were worth just $15 billion, its imports $27 billion.

As expected, North Korea’s trade reliance on China was highly significant (56.9%), partly because as strained inter-Korean relations started to bite, so inter-Korean trade declined as well: from 33.0% in 2009 to 31.4% in 2010.

Meanwhile, 61.0% of adults in South Korea are economically active, a number which rises to 70.2% in North Korea. Conversely, there are 3,134,000 college students in South Korea, but only 510,000 in North Korea.

In the energy industry sector in 2010, South Korea imported 872,415,000 barrels of crude oil, 226.4 times more than North Korea’s 3,854,000. The electricity generating capacity of South Korea is 10.9 times more than that of North Korea, too, though the generated amount was actually around 20 times bigger, the statistics allege.

Automobile production was no better; in South Korea (4,272,000), 1,068 times more than North Korea (4,000). Steel production in South Korea was 46.1 times that of North Korea, cement was 7.6 times more, and fertilizer 6.1 times.

UPDATE 2: The Hankyoreh adds some critiques of the data:

“With inter-Korean relations so tense, it is no longer possible for us to do the kind of North Korean grain production estimates that were possible under the previous administration,” a government official explained on Tuesday.

2010 production figures for rice, corn, barley, beans, and other major grains were left blank in a Statistics Korea report on major statistical indicators in North Korea. The numbers were included in statistical data released in 2008, 2009, and other years.

A Statistics Korea official said, “We made several requests to the organization in charge, but they didn’t provide materials, so we couldn’t print them.” The Rural Development Administration is responsible for investigating North Korean grain production. Early every year, it has estimated and released North Korean grain production figures for the previous year. Since 2011, however, it has failed to release figures.

A government official explained, “Since inter-Korean relations were decent during the previous administration, it was possible to go to the North and get samples to use as a basis for estimates.”

“With inter-Korean exchange all but completely halted under the current administration, the basis for releasing estimates has disappeared,” the official added.

Some observers said the decision was motivated by concerns that South Korean public support for food aid to North Korea could grow if low figures are presented. The argument is that there is no reason the kind of grain production estimates that were possible in 2008 and 2009, while the Lee administration was in office, would not be so for 2010 alone. Observers are also expressing bafflement at the fact that only agricultural products were omitted from estimates at a time when even the number of cars is being estimated in the area of industrial products.

Kim Yong-hyun, a professor of North Korean studies at Dongguk University, said, “Recently, food aid negotiations have been taking place between North Korea and the US, and I suspect the government may have decided not to announce [the estimates] because it was too concerned about public sentiment in South Korea.”

The North Korea figures released Tuesday also showed South Korea‘s per capita gross national income of $20,759 to be 19.3 times North Korea’s $174 for 2010.

According to Yonhap:

Trade between the United States and North Korea reached US$2.45 million in October, a U.S. report showed Saturday.

The bilateral trade volume was comprised completely of aid goods offered by the U.S. to the communist state, the Voice of America (VOA) reported citing data compiled by the U.S. Department of Commerce.

The VOA said the Department of Commerce did not give specifics on what kinds of goods were shipped to North Korea, but the goods traded are considered humanitarian aid products as the two countries are not engaged in commercial trade.

In the first 10 months of the year, the bilateral trade reached $6.24 million, compared with $1.90 million a year earlier, the report said.

Here is a list of DPRK/US engagement stories in 2011.

Read the full story here:
U.S.-N. Korea trade reaches US$2.45 mln in Oct.
Yonhap
2011-12-10

UPDATE 75 (2011-12-5): The ROK will donate US$5.65 million to N. Korea through the UN. According to Yonhap:

South Korea said Monday it will donate US$5.65 million (about 6.5 billion won) for humanitarian projects in North Korea through the U.N. body responsible for the rights of children.

The donation to the United Nations Children’s Fund, or UNICEF, will benefit about 1.46 million infants, children and pregnant women in North Korea, according to the Unification Ministry, which is in charge of relations with the North.

Seoul’s contribution will be used to provide vaccines and other medical supplies as well as to treat malnourished children next year, said the ministry.

There have been concerns that a third of all North Korean children under five are chronically malnourished and that many more children are at risk of slipping into acute stages of malnutrition unless targeted assistance is sustained.

“The decision is in line with the government’s basic stance of maintaining its pure humanitarian aid projects for vulnerable people regardless of political situation,” Unification Ministry spokesman Choi Boh-seon told reporters.

South Korea has been seeking flexibility in its policies toward the North to try to improve their strained relations over the North’s two deadly attacks on the South last year.

Despite the South’s softer stance, North Korea recently threatened to turn Seoul’s presidential office into “a sea of fire” in response to South Korea’s military maneuvers near the tense western sea border.

South Korea donated $20 million for humanitarian projects in North Korea through the UNICEF between 1996 and 2009.

Last month, the South also resumed some $6.94 million worth of medical aid to the impoverished communist country through the World Health Organization.

…

Separately, South Korea also decided to give 2.7 billion won ($2.3 million) to a foundation to help build emergency medical facilities in an industrial complex in the North Korean border city of Kaesong.

UPDATE 74 (2011-12-2): The Choson Ilbo reports that the DPRK’s food prices are rising after the 2011 fall harvest, however, the price increase is not due to a shortage of output, but rather political directives. According to the article:

The price of rice in North Korea is skyrocketing, contrary to received wisdom that it drops after the harvest season. According to a source on North Korea on Wednesday, the rice price has risen from 2,400 won a kg in early October to 5,000 won in late November.

North Korean workers earn only 3,000-4,000 won per month.

This unusual hike in rice price seems to be related to preparation of next year’s political propaganda projects.

A South Korean government official said, “It seems the North Korean government is not releasing rice harvested this year in order to save it up” for celebrations of regime founder Kim Il-sung’s centenary next year, when the North has vowed to become “a powerful and prosperous nation.”

UPDATE 73 (2011-11-24): According to the Daily NK, DPRK television is calling on people to conserve food:

With barely a month left until 2012, the year in which people were promised a radical lifestyle transformation to coincide with the North Korea’s rebirth as a ‘strong and prosperous nation’, programs calling upon people to conserve food are now being broadcast by Chosun Central TV and the fixed-line cable broadcaster ‘3rd Broadcast’.

Chosun Central TV is broadcasting the programs as part of ‘Socio-Culture and Lifestyle Time’, which begins directly after the news on Thursdays at 8:40pm. The majority of the content is apparently now about saving food.

A Yangkang Province source told The Daily NK on Wednesday, “Recently the head lecturer from Jang Cheol Gu Pyongyang Commercial University, Dr. Seo Young Il, has been appearing on the program both on television and the cable broadcasting system, talking about saving food.”

In one such program, Professor Seo apparently noted, “In these days of the military-first era there is a new culture blossoming, one which calls for a varied diet,” before encouraging citizens to eat potatoes and rice, wild vegetables and rice and kimchi and rice rather than white rice on its own, and then adding that bread and wheat flour noodles are better than rice for lunch and dinner.

It is understood that older programs with titles such as ‘A Balanced Diet is Excellent Preparation for Saving Food’ and ‘Cereals with Rice: Good for Your Health’ are also being rebroadcast, while watchers are being informed that thinking meat is required for a good diet is ‘incorrect’.

Whenever North Korea is on high alert or there is a directive to be handed down from Kim Jong Il, both of Chosun Central TV and the 3rd Broadcast are used to communicate with the public. For this reason, some North Korea watchers believe the recent food-saving campaign may reflect a particularly weak food situation in the country going into the winter.

According to the source, one recent program showed a cookery competition involving members of the Union of Democratic Women from Pyongyang’s Moranbong District. During which, one woman was filmed extolling the virtues of potato soup, saying “If we follow the words of The General and try eating potatoes as a staple food, there will be no problem.”

Read all previous posts on the DPRK’s food situation this year blow:

(more…)

Story 1 (Daily NK): Ministry strikes out currency swap (2011-12-1):

The Ministry of Unification has concluded that the currency redenomination implemented by the North Korean government two years ago was, as is already widely accepted, an utter failure in most regards.

According to the ministry, which revealed its assessment today, North Korea intended to use the currency redenomination to weaken the role of the markets, generate supplies of capital for the construction industry and adjust the amount of domestic currency in circulation, but ended up achieving the opposite.

Instead, the overall economy slowed, while markets have now made a comeback, recovering to their state they were in before the event.

The process was simple. Straight after the currency redenomination, the flow of commodities rapidly froze up due to contracting supply and weakening purchasing power. According to the Ministry of Unification, factories and enterprises that relied heavily on materials and capital from the market were fatally undermined. This immediately added to extant difficulties securing daily necessities, and forced the authorities to tolerate the markets once again. Commodity flows are still in the process of recovering.

But worse, the value of the domestic currency fell and people’s preference for US Dollars and Chinese Yuan deepened further, setting exchange rates and prices in a continuously increasing inflationary spiral.

This can be seen in the case of rice, a good proxy for overall economic conditions. In 2009, rice cost between 20 and 40won, but within a year had increased abruptly to approximately 1,500won, and as of November, 2011 was more than 3,000won. Despite the 100:1 ratio of the redenomination, prices have returned to their level before the currency redenomination.

The North Korean authorities even attempted to ban the use of foreign currency in January, 2010, causing various problems which resulted in the withdrawal of the plan in the following month. In December, 2009, a US Dollar was worth 35 North Korean won, but by a year later had soared to 2,000 won, and is currently worth 3,800 won.

The North Korean authorities said the currency redenomination would improve the lives of the people, but in truth because of hyperinflation people’s lives have actually gotten more difficult.

At the time of the currency redenomination, they emphasized care for the common worker, giving them wage increases and cash payments; a one-off bonus (500won per person) to laborers and an additional payment to farmers (150,000won per person). However, nominal wages subsequently increased 100 times, and with a lack of food, necessities and soaring inflation, made the people’s lives worse.

The average worker’s salary is now 3,000won, but the living expenses of a family of four are approximately 100,000 won per month.

In conclusion, an official from the Ministry of Unification declared, “As long as there is deepening popular distrust of the North Korean authorities, it looks like the power to implement future policy will weaken. The decisions made by the authorities that decreased the quality of people’s lives deepened the distrust.”

“The seizure of property, which in the short term alleviated polarization, ended up causing more poverty among the general population and had a relatively minor effect on the people who hold a lot of foreign currency.”

“North Korea tried to restore their socialist economy via the currency redenomination, but in reviewing the comments and perspectives of various North Korea experts and defectors we can see that the currency redenomination was an overall failure.”

That being said, he noted, “There is a limit to the ability of collective discontent to turn into collective political organizing.”

Story 2 (Yonhap): Botched currency reform destabilizes N.K. rice prices, exchange rates (2011-12-1):

North Korea’s currency reform has failed to stabilize rice prices and its currency while the nation still endures lack of food and supplies, Seoul’s Unification Ministry said Thursday.

The North carried out a massive currency reform two years ago to try to rein in galloping inflation, squash free market activities and tighten state control over the economy. The measures failed to halt massive inflation and worsened food shortages and public backlash.

The North Korean won was traded at 35 won to one U.S. dollar in markets right after the currency reform in late 2009. But one dollar was traded at around 3,800 won in November, up from around 2,000 won in 2010, according to the ministry.

The ministry, which handles inter-Korean affairs, also said rice prices have risen to pre-currency reform levels in a sign of food shortages in North Korea.

A kilogram of rice cost up to 40 won in 2009 before skyrocketing to about 3,000 won in November, the ministry said in an assessment of the North’s currency reform.

The dire assessment comes as the North is struggling to achieve its goal of building a prosperous nation by next year, the centennial of the birth of the country’s late founder, Kim Il-sung, the father of current leader Kim Jong-il.

The rice prices started to soar in Pyongyang on rumors that Kim failed to secure much aid during his trip to Russia in August, Good Friends, a Seoul-based private relief agency, said in September.

Rice is a key staple food for both South and North Koreans.

The botched currency reform is “expected to further deepen public distrust of the authorities and undermine their control on the people,” the ministry said in an assessment report.

Still, North Koreans are unlikely to display any collective action, because there is no organized political force, the ministry said.

Kim has been ruling the country with an iron fist, and tolerates no dissent.

There have been reports of growing discontent in the communist country over chronic food shortages and political oppression, though no organized opposition has emerged to challenge the leader.

Story 3 (Daily NK): Rice and Yuan zooming up in Ryanggang (2011-11-28):

The price of North Korean rice and the Yuan exchange rate have both reached post-2009 record levels in Yangkang Province, with domestic rice surpassing 4,000 won/kg and 1 Chinese Yuan selling for 720 North Korean won on November 28th.

Although a geographically remote location when seen from within North Korea, Yangkang Province act as a barometer for the situation in other areas because it stands alongside the capital Pyongyang and the Shinuiju-Dandong area as one of the most marketized, active trading locations of all.

Speaking with Daily NK today, a source from the province commented, “In the daytime on the 27th, the Yuan price, which had risen to 780 won, fell back to 720 won; however, the discomfort of the people is continual,” before adding, “Because of the rising exchange rate, the rice price also went up to 4,000 won.”

According to the source, as the price of North Korean rice hit 4,000 won/kg, that of Chinese rice also reached 3,200 won and sticky rice 5,000 won.

This means that the price of rice in Hyesan, the provincial capital, has now risen 500 won in two weeks, while the value of the North Korean won has depreciated by 120 won over a similar period.

The cause of the problem stems from a number of sources, but at the top of the list is a lack of faith in the North Korean won and the continual desire on the part of people who hold currency not to do so in domestic money.

As a result, the source said that traders are not selling their products, preferring instead to watch for changes, and with customers less likely to buy at such inflated prices, the overall effect is that trading volumes in the market have fallen drastically.

He explained, “There is even one rumor out there suggesting that by year’s end the price of the Yuan will have reached 1,000 won and that before long rice will have gone over 5,000 won. Rice traders are not selling their stock, saying that ‘if it gets more expensive, I’ll sell’, and so those citizens who are unable to get food together are looking pretty uneasy.’

Meanwhile, the new price records present a sense of cruel irony for a country about to commemorate the 2nd anniversary of the November 30th, 2009 currency redenomination.

“This is all the fault of the government, which organized the currency redenomination and destroyed the value of Chosun money,” the source agreed, complaining, “The price of everything is soaring, so the time has come where we can’t even buy blocks of tofu to eat.”

UPDATE 32 (2012-1-27): According to an article in the New York Times, inter-Korean trade and aid declined in 2011:

On Friday, the South’s Unification Ministry said that South Korean aid to the North fell to 19.6 billion won, or $17.5 million, last year [2011], down more than 51 percent from a year earlier [2010].

Inter-Korean trade fell by more than 10 percent [from 2010 to 2011] to about $1.5 million in 2011, the ministry said.

UPDATE 31 (2011-12-10): According to the Korea Times, the potential food aid is not being auctioned off.  It is being sent to South America. According to the article:

Seoul will send baby food originally offered as aid to North Korea to El Salvador following Pyongyang’s refusal to accept delivery, to help the South American country deal with damaging floods, officials said Friday.

The delivery consists of 190,000 packs of baby food that were part of a $4.4 million flood aid package to the North, which the Stalinist regime rejected two months ago amid high tension.

It was slated to depart from the port city of Busan via cargo ship for El Salvador, which has appealed for help to deal with floods that displaced tens of thousands earlier this year.

Seoul offered the aid, which also included biscuits and instant noodles, to help the North deal with torrential summer rains. But Pyongyang demanded cement and equipment instead and eventually shunned the offer altogether.

The rerouting of the items underscores lingering tension despite efforts to warm ties and eventually resume regional dialogue on dismantling the North’s nuclear program. Regional players want the situation on the peninsula to improve before the talks begin.

Pyongyang’s silence over the aid put a damper on the early signs of improvement. President Lee Myung-bak has been exercising a softer line since September, when he tapped close aide Yu Woo-ik as unification minister, including expanding humanitarian activities and cultural exchanges.

But the North, apparently seeking rice and other forms of massive aid, has recently slammed the flexible policy as political pandering to the South Korean public, which is gearing up for elections next year.

Such remarks come even as the unification ministry continues to approve northbound aid, including $5.65 million worth for infants, children and pregnant women through the United Nations Children’s Fund (UNICEF). Consultations are ongoing over how to provide more of the baby food. Seoul has also attempted to auction some of it off through a government website.

The North Korean regime is thought to be doing all it can to secure food and other handouts ahead of next April, when it will celebrate the 100th anniversary of the birth of its founder Kim Il-sung. Watchers say that the North is liable to alternate pressure and peace offensives to secure as much aid as it can through inter-Korean and multilateral channels.

UPDATE 30 (2011-12-6): According to the Korean Herald the first auction of potential food aid (See Update 27 below) did not go so well, so Seoul is trying again:

South Korea plans a second attempt to auction off baby food originally intended for North Korean children, officials said Tuesday.

The move comes after nobody bid for 540,000 packs of baby food on Onbid, an auction Web site run by the state-run Korea Asset Management Corp.

South Korea plans to issue a second public notice and adjust the prices, said an official handling the issue at the Unification Ministry. He did not elaborate on further details.

The baby food is part of 5 billion won ($4.4 million) worth of emergency relief aid South Korea had planned to ship to North Korean flood victims earlier this year.

South Korea dropped that plan in October after differences between the two Koreas on the items to be sent. South Korea had insisted it would deliver baby food, biscuits and instant noodles to the North, instead of the cement and equipment its communist neighbor had requested.

Separately, South Korea has been in talks with local private relief agencies over how to donate another 290,000 packs of baby food to other countries, according to another ministry official.

She declined to give further details, saying consultations are taking place.

UPDATE 29 (2011-12-5): The South Koreans will donate US$5.65 million to the DPRK via UNICEF.  Accoring to Yonhap:

South Korea said Monday it will donate US$5.65 million (about 6.5 billion won) for humanitarian projects in North Korea through the U.N. body responsible for the rights of children.

The donation to the United Nations Children’s Fund, or UNICEF, will benefit about 1.46 million infants, children and pregnant women in North Korea, according to the Unification Ministry, which is in charge of relations with the North.

Seoul’s contribution will be used to provide vaccines and other medical supplies as well as to treat malnourished children next year, said the ministry.

There have been concerns that a third of all North Korean children under five are chronically malnourished and that many more children are at risk of slipping into acute stages of malnutrition unless targeted assistance is sustained.

“The decision is in line with the government’s basic stance of maintaining its pure humanitarian aid projects for vulnerable people regardless of political situation,” Unification Ministry spokesman Choi Boh-seon told reporters.

South Korea has been seeking flexibility in its policies toward the North to try to improve their strained relations over the North’s two deadly attacks on the South last year.

…

South Korea donated $20 million for humanitarian projects in North Korea through the UNICEF between 1996 and 2009.

Last month, the South also resumed some $6.94 million worth of medical aid to the impoverished communist country through the World Health Organization.

..

Separately, South Korea also decided to give 2.7 billion won ($2.3 million) to a foundation to help build emergency medical facilities in an industrial complex in the North Korean border city of Kaesong.

More than 47,000 North Koreans work at about 120 South Korean firms operating in the industrial zone to produce clothes, utensils, watches and other goods. The project serves as a key legitimate cash cow for the impoverished communist country.

UPDATE 28 (2011-12-1): Distribution of private aid monitored in N.Korea. According to the Hankyoreh:

“North Koreans know that the wheat flour aid they received came from South Korea.”

These were the words of Cho Joong-hoon, director of the Unification Ministry’s humanitarian assistance division, during a meeting with reporters Wednesday at the Central Governmental Complex in Seoul upon his return from a recent visit to North Korea to monitor the distribution of aid.

“The name of the South Korean private aid group, the manufacturing company, the date, and the address were all printed on the packages of flour,” Cho said.

Arriving in North Korea on Sunday with Kim Min-ha, co-chairman of the private group Ambassadors for Peace, and three others, Cho visited three sites to observe the distribution of the 300 tons of flour provided in aid. The site were the Namchol Kindergarten, February 16 Refinery Kindergarten, and Tongmun Nursery in Chongju, North Pyongan.

It was the first visit to any part of North Korea besides Kaseong and Mt. Kumkang by a government official in the one year since the Yeonpyeong Island artillery attack on Nov. 23, 2010.

Cho said that the distribution, storage, preparation, and supply of the flour were monitored and that everything was confirmed to be proceeding as planned.

On the situation on the ground, Cho said, “Judging simply from the nursery and two kindergartens, the children’s nutritional condition does not appear to be good.” Cho noted that no heating was being supplied to the facilities despite the cold weather.

Cho said that while North Korean authorities did not official request food aid, a request was made under unofficial circumstances.

Cho also noted that construction efforts were under way on a highway connecting Pyongyang with Sinuiju.

“It is not very far from Pyongyang to Chongju, but I think the trip took about four hours because of the detour around the highway construction,” he said.

Analysts said this appears to be linked to hurried infrastructure building efforts, including highway servicing and construction, amid recent moves by North Korea to rebuild its economy through a stronger economic partnership with China.

UPDATE  27 (2011-11-29): Seoul auctions off “unwanted” DPRK food assistance. According ot the Korea Times:

South Korea has taken steps to auction off some baby food originally intended for North Korean children, an official said Tuesday.

The move comes nearly two months after South Korea dropped a plan to send 5 billion won ($4.3 million) worth of aid to North Korean flood victims, citing no response from the North as the reason for the change of plan.

South Korea had insisted it would deliver baby food, biscuits and instant noodles to the North instead of cement and equipment requested by the North.

South Korea’s Red Cross, which handles relief aid to the North, gave public notice of a bid for 540,000 packs of baby food on Onbid, an auction website run by the state-run Korea Asset Management Corp.

Separately, South Korea has been in talks with local private relief agencies over how to donate the other 290,000 packs of baby food to foreign countries.

Unification Minister Yu Woo-ik has ruled out rice aid to the communist country unless Pyongyang admits to last year’s deadly provocations.

South Korea suspended unconditional aid in 2008 and imposed sanctions on the North last year in retaliation for the sinking of a South Korean warship that was blamed on the North.

The North has denied involvement in the sinking that killed 46 sailors. It also shelled a South Korean border island in November 2010, killing four South Koreans.

Still, South Korea has selectively allowed religious and private aid groups to deliver humanitarian and medical assistance to North Korea.

Also on Tuesday, a Unification Ministry official and four civilians were to return home after a rare trip to the North aimed at ensuring that South Korea’s recent private aid had reached its intended beneficiaries.

UPDATE 26 (2011-11-25): According to Yonhap, ROK officials are traveling to the DPRK to monitor food aid:

A South Korean official and four civilians left for North Korea on Friday on a rare mission to ensure that recent aid from Seoul had reached its intended beneficiaries, an official said.

The trip comes a day after North Korea threatened to turn South Korea’s presidential office into “a sea of fire” in anger over Seoul’s massive military maneuvers near the tense sea border.

…

The Unification Ministry official and four civilians were to arrive in the North’s capital later Friday via Beijing, according to the Unification Ministry, which handles inter-Korean affairs.

It is first time that North Korea has allowed a South Korean official to travel to the isolated country to monitor aid since a conservative government took power in Seoul in 2008.

They are scheduled to visit a day care center and two other child care facilities in the northwestern city of Jongju to monitor how 300 tons of flour were distributed to children and other recipients, according to a civic group.

Ambassadors for Peace Association, a civic group that is partly funded by the Unification Group, donated the flour to Jongju, the birthplace of Unification Church founder Moon Sun-myung.

The civic group said the monitors also plan to discuss details on another 300 tons of flour aid before returning home Tuesday. Some members of the civic group are associated with the controversial Unification Church.

Read previous posts on the ROK’s aid to the DPRK in 2011 below:

(more…)

Institute for Far Eastern Studies (IFES)
2011-11-23

North Korea has reportedly stopped coal export temporarily to manage fuel shortage during the winter season.

According to Chinese traders from Shenyang, their North Korean trade counterparts informed them that they recently received official orders from the government to stop exporting coal. Except for those orders previously received, coal from North Korea will not be leaving the country for the time being.

The export volume of coal has continuously increased this year, consequently causing a domestic shortfall in the supply of coal. In fear of power and fuel shortages for the winter season, North Korea is believed to be taking precautionary measures to preserve energy supply, especially with hydroelectric power generators not in operation.

From this year, North Korea has drastically increased coal export to China. From January to July, China has imported about 816,700 tons of North Korean anthracites, nine times more than the previous year. Anthracites made up 46.3 percent of the all the exports to China.

The amount of North Korean anthracites that entered China via Donggang Port (located in Dandong City, Liaoning Province) reached over 77.7 million USD. The city of Dandong is located across from Sinuiju. Separated by the Amnok River (Yalu River), it is the trade hub between China and the DPRK, with over 70 percent of total bilateral trade taking place in the city, as anthracite coal as the main object of trade.

With the international price of coal on the rise and operation of hydroelectric power plants in decline, dependence on thermoelectricity is growing, which explains the recent climb in China’s anthracite import.

Toughened international sanctions and halted trade with South Korea has made North Korea turn to natural resource trading with China to bring in hard currency.

In August 2009, North Korea halted coal exports when it was faced with extreme power shortage. However, coal trade was resumed the following April.

Massive amounts of coal were exported to China to earn foreign currency, but this has created serious energy shortage affecting the operations of factories and other industrial facilities.

During the field guidance visit to the February 8 Vinalon Complex, Kim Jong Il emphasized that “Raw materials must be adequately supplied to normalize the production of factories.”

However, most North Korean traders agreed that such suspension would not be prolonged for a lengthy period, since North Korea, who is heavily dependent on mined resource exports including coal and steel, cannot afford to enforce a trade embargo for long. Many expect the trade to resume by next spring.