North Korean Economy Watch

Forgotten People:  The Koreans of the Sakhalin Island in 1945-1991
Download here (PDF)
Andrei Lankov
December 2010

North Korea: Migration Patterns and Prospects
Download here (PDF)
Courtland Robinson, Center for Refugee and Disaster Response, Bloomberg School of Public Health, Johns Hopkins University
August, 2010

North Korea’s 2009 Nuclear Test: Containment, Monitoring, Implications
Download here (PDF)
Jonathan Medalia, Congressional Research Service
November 24, 2010

North Korea: US Relations, Nuclear Diplomacy, and Internal Situation
Download here (PDF)
Emma Chanlett-Avery, Congressional Research Service
Mi Ae-Taylor, Congressional Research Service
November 10, 2010

‘Mostly Propaganda in Nature:’ Kim Il Sung, the Juche Ideology, and the Second Korean War
Download here (PDF)
Wilson Center NKIDP
Mitchell Lerner

Drug Trafficking from North Korea: Implications for Chinese Policy
Read here at the Brookings Institution web page
Yong-an Zhang, Visiting Fellow, Foreign Policy, Center for Northeast Asian Policy Studies
December 3, 2010

Additional DPRK-focused CRS reports can be found here.

The Wilson Center’s previous NKIDP Working Papers found here.

I also have many papers and publications on my DPRK Economic Statistics Page.

According to Yonhap:

North Korea’s rice reserves may total 1.1 million tons, which could feed the country for 110 days, a government source said Tuesday.

The source, who declined to be identified, said the estimate is based on continuous monitoring of rice stockpiles by the intelligence agencies in South Korea and the United States.

He said that while the total amount can be determined, it is hard to say if the rice is being reserved for the military or for the general population.

“Due to the nature of modern warfare it is pointless to separate if rice reserve will be used by the military or the civilian population in emergency situations,” the official said. He also declined to say if Pyongyang maintained 300 storage areas as claimed by some independent organizations.

Related to the rice reserve that North Korea may possess, an official from the National Intelligence Service (NIS) claimed in a meeting of lawmakers earlier in the day that recent remarks by Rep. Kim Moo-sung, who said Pyongyang held 1 million tons in rice reserves for the military, was not groundless.

Kim is the floor leader of the ruling Grand National Party and made the remark to point out that the North had the means to alleviate food shortages on its own to a certain extent.

The NIS official added that rice aid to North Korea must be based on clear cut strategies reflecting overall circumstances.

The Lee Myung-bak administration put the breaks on helping North Korea after a South Korean tourist was shot dead in a mountain resort in July 2008. The sinking of a South Korea Navy ship March further cooled inter-Korean relations with Seoul, making clear that it will effectively cut most exchange programs with the North.

Before 2008, Seoul regularly shipped 300,000-400,000 tons of rice to the North along with substantial amounts of fertilizers.

Read the full story here:
N. Korea’s rice reserves may total 1.1 mln tons: source
Yonhap
9/28/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-08-06-1
8/6/2010

Over the last five months, regular food rations have not been provided even to those in the capital city of Pyongyang, indicating the severity of food shortages in North Korea. According to the ROK Ministry of Unification, rice and corn were added to the list of goods with controlled prices in at least one market in Pyongyang. A list of controlled goods with state-set upper price limits has been distributed to each market throughout North Korea since 2003. While prices may vary slightly, comparing them with earlier price caps gives a good indication of the availability of goods.

The July appearance of rice and corn on the list of restricted goods, neither of which has been on the list even as far back as February, when strict market controls were enacted in the aftermath of failed currency reform measures, indicates that the ration system is not operating normally, even in Pyongyang. It also means that not only are officials not receiving normal rations, but that average residents are relying more on markets for their food. One Unification Ministry official stated, “Rice was on the list of controlled goods in markets outside of Pyongyang in February, but couldn’t be found in markets in the capital city…in July, rice and corn emerged [as items with price caps] in Pyongyang markets.” The official also explained that as the food ration system collapsed even in Pyongyang, the issuance of price caps on rice and corn was an indication that more people were turning to the markets to buy these staples.

Looking at other goods on the list, it appears that agricultural goods cost 3~7 times more in July than in February, and manufactured goods were as much as 7 times more expensive. Necessary goods, both agricultural and manufactured, have grown considerably more expensive in North Korea over just five months. More specifically, beans were up 3.6-fold; chicken, 3.3-fold; lettuce, 3-fold; apples, 6.3-fold; rice and corn, 2-fold. Ball-point pens and other daily-use items were up 5~6-fold. In July, rice sold for 550 won per kilogram, while corn was priced at 280 won per kilo.

The price caps are upper limits set by North Korean authorities, but the reality is that goods are often sold at higher prices. The shortage of agricultural goods, and the fact that the Chinese Yuan has appreciated 3-fold since February, has led to these record price-hikes. On May 26, Workers’ Party of Korea (WPK) authorities issued a decree, “Regarding Korea’s Current Food Situation,” calling for residents to fend for themselves. As prices skyrocketed on agricultural goods, one measure adopted by North Korean authorities has been to more than double exports of iron ore from Musan, North Hamgyong Province to China, while drastically increasing the import of corn. This increased import of corn has brought down the price of rice from 1,200 to 900 won per kilogram in Musan, while corn itself has fallen from 600 to 500 won. On the other hand, the drop in the foreign currency exchange rate in mid-July caused a shortage of dollars, driving the price of rice up to as high as 1,200 won per kilogram in some regions.

According to the Daily NK:

The gap between the rich and poor in North Korea is growing as the number of people trying to sell their family home to buy food expands in the aftermath of last November’s currency reforms, according to a source from inside the country.

The source from South Pyongan Province told The Daily NK on Thursday, “An increasing number of homes are being sold to buy food, and now it seems like about two out of every ten people around here have lost their home.”

According to the source, the rich buy up the houses, demolish them and build new ones to sell for a profit. Those who have amassed dollars or Chinese Yuan from trading are now turning to the housing market.

Even in Pyongyang, where the public distribution system continues to function, there are homeless people on the street, according to the source, who added, “When I was in Pyongyang, there were homeless people sleeping in the subway in large numbers.”

The source went on, “People’s lives are very difficult. There are even some who rely on digging up 5kg of wormwood, walking three hours to sell it, and only getting 100 won per kg.”

Currently, 1kg of rice sells for 400 to 500 won in Pyongyang, and 500 to 600 won in other areas.

The source also explained, “While public distribution still functions in Pyongyang, there are strict restrictions on movement, and even with our salaries we can’t buy food because there is too little.”

Since the economy is so bad, the crime rate is also going up, he added, “There are now more and more pick pocketing cases, and these days, they not only use small knives to steal purses, but even tweezers to pick stuff from pockets.”

The source’s assertion that there was public distribution until mid-June contradicts the claim of one NGO, which said that on May 26 the authorities ordered each area to look out for its own food supply. The source, when asked about the decree, said he was unaware of its existence.

Read the full story here:
Life Even Tough in Pyongyang
Daily NK
Kim So Yeol
7/2/2010

According to the Donga Ilbo:

North Korea seeks to directly handle tours to the Mount Kumgang area after forcing South Korea out of the venture, said a source on North Korean affairs yesterday.

Korea Taepung International Investment Group, an agency under the North’s powerful National Defense Commission, has reportedly recruited Chinese companies to help operate the tour since January this year.

The source said, “Negotiations have significantly progressed in certain aspects,” adding, “I understand the North Korean leadership is considering directly operating the Mount Kumgang tour by getting Taepung or an agency under the National Defense Commission to hire multiple Chinese companies as agencies after forcing the Hyundai Group out of Mount Kumgang and Kaesong.”

Another informed source said, “Since Taepung is an agency that holds overall authority over attracting investment for the North’s national development, the group is believed to be advising and supervising efforts to resume the Mount Kumgang tour as well.”

On this, a South Korean government source said, “Even if the North severs ties with Hyundai Asan Corp., complicated legal action will continue over the North’s violation of the contract,” adding, “No Chinese company will seek to serve as a comprehensive business operator, so the new plan appears to be the most practical alternative for North Korea.”

If Taepung or an agency under the defense commission starts to operate the tour directly, the tour program will likely be operated under a completely different system.

The tour’s South Korean operator, Hyundai Asan, has wielded comprehensive and monopolistic rights to the venture, but North Korea appears to have taken over as the operator, with multiple foreign companies taking part.

An agency under the North’s defense commission or military will likely step forward to operate the tour in lieu of Pyongyang’s Asia-Pacific Peace Committee under the ruling Workers’ Party or the Landmark General Development Bureau under the North Korean Cabinet.

And according to Yonhap:

Dozens of South Korean business officials will visit North Korea this week to comply with Pyongyang’s demand that they be present when the communist state freezes their assets at a joint mountain resort, officials said Monday, amid fears of further confiscation.

North Korea already confiscated five South Korean government-run facilities, including a family reunion center and a fire station, at its Mount Kumgang resort on the east coast last week.

The move reflected Pyongyang’s anger over Seoul’s refusal to resume cross-border tours that were halted in 2008 after the fatal shooting of a South Korean tourist by a North Korean guard near the resort.

North Korea insists it has done everything to explain the shooting and guarantee safety for future South Korean visitors. South Korea doubts the genuineness of the gestures, demanding an on-site probe participated in by its officials and tangible safety measures.

The tours earned millions of U.S. dollars for the sanctions-hit North Korean regime before they were suspended. The North Korean demand for their resumption comes as the isolated state struggles to curb its economic troubles that deepened under U.N. sanctions imposed for its two nuclear tests, the latest in May last year.

An official at Hyundai Asan, the chief South Korean operator of the now-suspended tours, said 40 people from 31 companies, including his own, applied for permits to visit North Korea on Tuesday.

The North last week demanded “real estate proprietors and agents” attend the implementation of its plan to freeze their assets, which include hotels, a golf course and a variety of shops.

Officials at the Unification Ministry in Seoul said they plan to grant the permits.

“It is our basic stance that we respect the decisions of the companies,” spokesman Chun Hae-sung said.

Dozens of South Korean firms possess 360 billion won (US$320 million) worth of real estate in the mountain tourist zone.

During a meeting with Hyundai Asan officials stationed at the resort Monday morning, North Korea did not specify which companies should attend the freeze this week, a ministry official here said.

“The North Korean authorities remained ambiguous,” the official said, declining to be identified. “That will leave the door open for anyone wanting to visit North Korea this week.”

South Koreans fear Pyongyang may be taking steps to confiscate more South Korean assets. The North seized the Seoul government-run facilities 10 days after freezing them and expelling personnel.

South Korea has pledged retaliatory measures without being specific. A senior Unification Ministry official, who spoke on the condition of anonymity, said Monday the measures would be announced by early May.

South Korea also warned North Korea will be to blame for any further deterioration of relations between the divided states.

The Korea Herald speculates on how the South Korean government might retaliate:

The government is reportedly considering limiting the volume of agricultural and marine products from North Korea or tightening regulation of imports in other ways.

Certain North Korean items, such as sand, hard coal and mushrooms, already require the unification minister’s approval each time someone wants to bring them into the South. Seoul could expand the number of such items, making the import process more troublesome.

Currently, South Korean materials going into the joint industrial park in the North’s border town of Gaeseong and products rolled out from factories there account for more than 60 percent of inter-Korean trade.

Last month’s inter-Korean trade volume amounted to $202 million, 63 percent of which were goods going in and out of the Gaeseong park.

Since cross border tours to Mount Geumgang have been stalled, most of the remaining inter-Korean trade volume (35 percent) consists of agricultural and marine products.

Although the growth of inter-Korean trade has slowed under the Lee Myung-bak administration, South Korea is still the North’s second largest trading partner after China, according to the Unification Ministry.

Inter-Korean trade accounts for about 30 percent of the North’s trade with other countries, while China takes up about half.

The Seoul government could also further restrict nongovernmental aid to the North, which it has limited ever since Pyongyang launched a rocket in April last year.

It could also engage to the international community about the North’s “wrongful measures.”

Read the full stories here:
N. Korea to Directly Take Over Mt. Kumgang Tour
Donga Ilbo
4/26/2010

S. Koreans to visit N. Korea as Pyongyang moves to freeze their assets
Yonhap
Sam Kim
4/26/2010

Seoul may cut trade with N. Korea
Korea Herald
Kim So-hyun
4/25/2010

According to Yonhap:

South Korea has significantly reduced import quotas for eight North Korean agricultural goods, government officials said Sunday, amid the enforcement of strong U.N. economic sanctions on the communist nation.

According to a public notice posted by the Unification Ministry, the amounts of six North Korean goods allowed to be shipped to the country, including crab, shrimp and peanut products, have been reduced to half from those of last year while the import quota for sesame seed has been reduced from 300 tons to 100 tons.

An official at the ministry, Seoul’s key office on North Korean affairs, said the move had little to do with the U.N. sanctions that were imposed shortly after the North’s second nuclear detonation test last year.

“The items, whose import quotas have been reduced this year, are the ones we had little imports of in the past five years,” the official said, asking not to be identified. “The change was only to reflect the actual amount of imports.”

The import quota for mung beans doubled from 1,000 tons last year to 2,000 tons while that of soybeans also increased from 2,000 tons to 3,000 tons, according to the official.

The government places import quotas on certain items to protect domestic markets and producers, he noted.

This comes as South Korea ends imports of North Korean sand.

Daily NK
Jin Hyuk Su
3/8/2010

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

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

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

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

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

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

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

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

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

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

According to Yonhap:

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

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

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

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

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

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

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

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

According to the Financial Times:

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

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

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

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

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

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

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

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

Choson Ilbo
2/26/2010

North Korea is still demanding rice and fertilizer in return for an inter-Korean summit, even as it keeps sending increasingly urgent messages to Seoul to bring such a summit about.

Since a secret meeting between South Korean Labor Minister Yim Tae-hee and Kim Yang-gon, the director of the North Korean Workers’ Party’s United Front Department, in Singapore in October, “North Korea has kept asking us for a huge amount of economic aid in return for arranging a meeting” between President Lee Myung-bak and North Korean leader Kim Jong-il, a South Korean government source said on Thursday.

But the North seems to have no interest in giving in to South Korean demands to put denuclearization and the repatriation of prisoners of war and abduction victims on the summit agenda. “The North basically wants economic gain in return for letting us make political use of an inter-Korean summit for the upcoming local elections” on June 2, the source said. “It seems that the North still feels nostalgic for the Sunshine Policy,” which netted it huge benefits over the past decade.

The first inter-Korean summit in 2000 was announced only three days before the general election and was bought through a secret payment of billions of won. The second summit in 2007 was announced two months before the presidential election. Since 2000, the North has received more than 300,000 tons of rice and the same amount of fertilizer almost every year worth more than W1 trillion (US$1=W1,163) a year.

In another secret meeting between South Korea’s Unification Ministry and the North Korean Workers’ Party’s United Front Department in November, the North again insisted on specifying humanitarian aid in an agreement to be signed at an inter-Korean summit.

A “tree planting campaign for North Korea” initiated recently by the Presidential Committee on Social Cohesion also reportedly went awry because the North demanded a huge aid of food in return for letting South Korea plant trees there.

Kim Jong-il is apparently not aware that Seoul is serious about ending this cash-for-summits policy. A South Korean government official with experience in inter-Korean talks said, “At secret meetings, each side often had its own way of interpreting agendas. Maybe North Korean delegates who are accustomed to the Sunshine Policy are trying to interpret the current government’s messages the way they did with past governments.”

It seems the North has attempted to earn economic aid worth W1 trillion by prevaricating over the issue of the POWs and abduction victims, offering to handle it like part of reunions of separated families, and discussing the nuclear issue only with the U.S. 

Whether the attitude will change remains to be seen. The North is now in a worse economic situation than before in the wake of a recent disastrous currency reform on top of international sanctions and a severe food shortage.

Prof. Cho Young-ki of Korea University said, “The North is in dire need of support from the outside including South Korea to stabilize the regime for a smooth transition of power” to Kim’s son Jong-un. “It is possible that the North will reluctantly accept our request depending on progress in the six-party nuclear talks.”

The government believes that a dramatic turning point in inter-Korean relations could be reached if the North makes “big decisions” in the nuclear or POW issues, according to Kim Tae-hyo, the presidential secretary for foreign strategies.