North Korean Economy Watch

Anyone who has spent time visiting North Korea on Google Earth will have noticed the acute shortage of trees.  I am not alone in this observation.  Dr. Lankov recently reported that South Korean tourists to Kaesong also sense this.

Donating trees to the North might sound like a particularly harmless form of aid–all the symbolism of inter-Korean cooperation without the messy politics of monitoring food aid or investment.  But the reality is far more pragmatic:

[H]elping North Korea to plant more trees is one of President Lee’s campaign pledges.

He said the South will send seedlings to the North but no details were given as to whether or when the two Koreas will meet for the forestry project.

The spokesman said when the Kyoto Protocol takes effect, the South can buy the right to emit CO2 from North Korea.(Korea Times)

The South Korean government is not alone in hoping to make money off increasing North Korea’s stock of trees.   Singaporean entrepreneur Richard Savage started a tree farm in the DPRK back in 2002:

Richard Savage kneels in the rich brown earth of a field on the outskirts of Pyongyang and reverentially spreads out the broad, green leaf of a young paulownia tree. The saplings have been in the ground for only a month but already they are a meter high; the first harvest could take place in just five years. Eyes shaded by his black cowboy hat, the Singaporean native gazes down the rows of juvenile trees, each worth thousands of dollars at maturity, with a satisfied grin. The experimental lumber crop has survived the harsh North Korean winter and is flourishing in the loamy soil. “The paulownia loves this,” he says. Glancing at another leafy plant, a new hybrid, he confides, “We’re going to let the Dear Leader name it.” (Time)

UPDATE 2002 (Via Werner Koidl):

The IHT wrote on Oct. 27th, 2006:
“Richard Savage, executive director of Maxgro, a company based in Singapore, is probably one of the most ambitious foreigners in North Korea. He is developing a hardwood plantation on 1,500 hectares, or 3,700 acres, manufactures Snow Pine cigarettes for the local market and is building an eight-story financial center in Pyongyang in a joint venture with the government and other investors.”

Even the North Korean government, though, has noticed that the forests are not as dense as they used to be.  Bradley Martin reported in Bloomberg that Kim Jong il has been pushing a reforestation program for some time:

North Korea’s deforestation program dates back to a 1961 speech by Kim Il Sung. In a mostly mountainous country, he proclaimed, “it is necessary to obtain more land through the remaking of nature.” Not only tidelands but “hills throughout the country and plateaus” should be “brought under the plough,” he said.

“The hills and mountains still had trees, and I never heard of floods,” said Hiroko Saito, a Japanese woman who moved with her Korean husband to North Korea in 1961. Her husband joined one of Kim’s vast mountain work teams in the early 1970s, said Saito, now 66 and back in Japan.

…

Following Kim’s death in 1994 — just before a flood-linked famine gripped the nation — his son and successor Kim Jong Il continued the sacrifice of forest cover until 2000, when he began encouraging reforestation. But the shift hasn’t reversed the damage, and some analysts warn that another famine, close to the scale of the 1990s disaster that may have killed millions of people, might occur as soon as next year.

The government’s agricultural policies launched a cycle of events that lead to greater and greater numbers of trees being culled.  Clearing the forests contributed to seasonal flooding.  The floods exacerbated the food shortage, and pushed people to adopt coping mechanisms to meet their minimum caloric intake for survival.  These coping mechanisms take a toll on what remains of the forests–which exacerbates the flooding.  Repeat annually. This  cycle of destruction has seemingly frustrated Mr. Kim’s plans to bring back the forests:

“For the past few years, I have been telling you to work hard afforestation and have encouraged you at every opportunity.”

“However, an forestation has not met the criteria of authorities and is not going according to plan.”

What Kim Jong Il is trying to say is that, “The reason afforestation is not working is because of the people’s reckless slash-and-burn cultivation, as well as the inefficiency of officers unable to block it.”

After the food crisis in ’95, people uprooted vines and trees to suffice their underfed diets, as well as cultivating illegal farms for food. Further, to save themselves from freezing to death, people used trees as firewood.(Daily NK)

Spontaneous coping mechanisms aside, efforts at increasing forrest cover might prove more difficult than the government expects.  Even if it resolves the food shortage (which does not seem likely in the near term), it has seemingly lost control of its technocrats who have no problem selling DPRK lumber overseas:

…Oh Moon-hyuk, branch manager of the Ruengra 888 trading company in Yunsa, North Hamkyung Province, was executed after being implicated in the smuggling of timber. The trading company was responsible for the export of timber, and operates under the control of the Party’s accounting bureau. The inside contact stated that because of this incident, North Korean authorities carried out further inspections, leading in October of last year to the dismissal of one official receiving vice-minister pay, and the broadening of the inspections nationwide. (Institute for Far Eastern Studies)

The full articles can be found here:
S. Korea to Help N. Korea Plant More Trees
Korea Times
Kim Yon-se
3/5/2008

Kims’ Clear-Cutting of Korean Forests Risks Triggering Famine
Bloomberg
Bradley Martin
Hideko Takayama
11/21/2007

Cause of Barren Mountains: Imperialism-Natural Disaster-Officers
Daily NK
Han Young Jin
3/16/2007

Institute for Far Eastern Studies (IFES)
NK Bfrief No. 08-2-5-2
2/5/2008

Light from the North?
Time
Donald MacIntyre
8/11/2002

When looking at North Korea’s cities on Google Earth one can’t help but notice the number of monuments to the Great Leader.  But if you are looking for the true heart of the cities, in other words where all the people are, you need to look closely for North Korea’s markets.  They do have them–in all of the major cities visible on Google Earth:

 
 
(Clockwise from upper left) Markets in Pyongyang, Kaesong, Sinuiju, and Wonsan

This week, the Daily NK reported that the new regulations and crackdowns on market activity are meeting with resentment in Pyongyang. 

What happened?  Supposedly Pyongyang’s new Party Chief Secretary suggested to Kim Jong Il the idea of converting the jangmadang into farmers markets (in other words only selling agricultural goods from the countryside as in the past), and Mr. Kim approved it.

As of January 15, public announcements were placed on the entrances of marketplaces detailing what could/could not be sold in the market.  Violators are subject to having their goods confiscated by inspection units (these sorts of policies are ripe for promoting corruption).

Ever entrepreneurial, North Korean sellers simply adapted, shifting location from inside the marketplaces to back-alleys.  Seemingly, they are still subject to inspection and confiscation in these local neighborhoods, but apparently the risk is lower.  Several of these street markets are also visible on Google Earth:

But others have decided to stay put in the markets and simply hide their goods:

A portion of the people still secretly trade in the jangmadang. Simultaneously avoiding the inspection units, they refrain from putting out the goods and bargain with customers by holding up signposts. When they tell the passing-by customers, “This is what I have,” a bargain is reached. Of course, the goods are temporarily stored at a nearby residence and taken out after the bargain. (Daily NK)

Lankov also discussed the regulations and games people play to avoid the market inspection units here. 

The full article can be found below:
Jangmadang Will Be Converted to Farmers Markets
Daily NK
Jung Kwon Ho
2/13/2008

Below are three video’s recently posted on YouTube which portray North Korea’s national mourning in 1994 when Kim Il Sung passed away.  Although we do not know what people really think of the deceased leader, we do know that the public displays of sadness and eternal loyalty were scripted for television (and probably planned out in advance): Large crowds were mobilized at politically symbolic locations throughout the country, people were lined up in formations, given black arm bands, and placed in front of well-positioned television cameras to make sure they gave their best performances (which were strangely identical). 

The cameramen were also composed enough to carry out their tasks: Not only would they have to be dispatchted from Pyogyang to record the mass sadness, but they would have to arrive early to the scene, plan out their shots, record each scene several times, conduct multiple interviews, travel back to Pyongyang, and finally edit the footage into the final product.  This would all take a fair amount of time because travel conditions between the different locations would have been less than stellar.

Click on the images below to see the three part video:

Part 1.  

Part 2.

Part 3. 

This should not be a surprise to anyone who is familiar with how socialist and highly regulated economies actually function.  If there is a profit opportunity to be had by breaking a regulation, there will generally be a bureaucrat there willing to pocket some of the earnings to look the other way.

The fact that ordinary North Koreans are willing to pay to get access to Kaesong jobs should send a powerful signal to those who call for the zone’s abolition. Wages and working conditions at the complex, though not popular with Western activists, are relatively better than those on the local collective farm.  When the average Kaesong resident figures out that working there will lead to a better life, baksheesh is inevitable. 

Claudia Rosette covered a similar phenomenon with North Korean loggers in Russia.

The Daily NK covers the Kaesong phenomenon specifically:

Known as a “dream place of employment” among North Koreans, citizens of the North are paying hundreds of thousands of won in the form of bribes to gain employment in the facility.

“They say that one can find a job in the Kaesong Industrial Complex by giving 700,000 North Korean won in bribes for males and 200,000 won for females. If I had used the 200 USD (approximately 700,000 won) spent in obtaining a passport as a bribe, I could have entered the Complex.”

As for the why the Kaesong Complex is so popular, Kim explained, “Commodity provision tickets, equivalent to a worker’s salary, are given to laborers in Kaesong and if one uses these tickets well, he or she can make a huge profit.”

Currently, the official salary for laborers at the Kaesong Industrial Complex is around 60 USD, a small amount of which is distributed as cash and the rest in the form of “commodity provision tickets.”

In the Kaesong Industrial Complex, there are several shops that can only be frequented by Kaesong laborers and the prices at these stores are at inexpensive compared to prices in the jangmadang.

Laborers at the Kaesong Industrial Complex use their “commodity tickets” to purchase products at a cheap price and can make a huge profit by selling the goods, giving the difference to middlemen (currency traders who mediate deals).

Recently, there have even been cases where the middlemen had specific orders for certain items from the Kaesong laborers, asking them to procure a certain amount of rice, oil, and so on. The middlemen can easily make an exorbitant amount of money by selling these goods at the jangmadang.

ADDENDUM REVISITED (The Daily NK is transalted into English and as a result is even less clear than my writing somethimes, so I have revised this post several times to clarify the text):

Opinions of the complex seemingly hinge on one’s policy goals.  If the primary goal is to raise living standards in the North and open the people up to outside influences, then Kaesong seems like progress (although maybe not the most cost effective).  If the primary goal is to minimize the income of the DPRK government, then the Kaesong zone probably is not a good idea…. 

Taking the latter point of view, Joshua at OneFree Korea emphasises the point that  the North Korean government keeps most of the cash wages paid to the workers, and that zone employees survive on the supplemental “commodity tickets”–either consuming the goods they purchase in the company store or selling them to local markets for cash.

Theoretically, though, if the thousands of workers employed in Kaesong were re-selling subsidized goods to the Kaesong public markets, this would have the (short run) effect of lowering or stabilizing food prices for the general public (since Zone employees do not need to purchase food at local markets and their clandestine re-selling of commodities to the markets increases the supply of cheaper goods).  This also means that  in general re-selling to the market is not terribly profitable to any zone employee, except when there is a temporary mismatch beteen supply and demand (which might be common depending on the reliability of the DPRK’s market supply chains).  How the price decrease would affect domestic food producers (and the long term price) is probably a bit more complicated since we are not sure how much North Korean farmers respond to price changes. 

Additionally, even though the North Korean government keeps most of the cash wages, the commodity coupons still give the worker approximately $60 in purchasing power –a decent income in North Korea. 

However, given that the South Koreans pay all cash wages go to the North Korean government and the workers themselves receive an additional $60 in script to use at the company stores, means that the average economic cost of a North Korean worker in  Kaesong is closer to $120/month! 

The whole article can be found here:
Bribery Required to Work at the Kaesong Complex
Daily NK
Jung Kwon Ho
2/4/2008

North Korea: Terrorism List Removal?
By Larry Niksch, Raphael Perl
Jan 14, 2008

The issue of North Korea’s inclusion on the U.S. list of terrorism-supporting countries has arisen twice in recent U.S.-North Korean diplomacy. In 2000, North Korea demanded that the Clinton Administration remove North Korea from the terrorism-support list before North Korea would send a high level envoy to Washington and accept the Clinton Administration’s proposal to begin negotiations with the United States over the North Korean missile program. In 2003, multilateral negotiations involving six governments began over North Korea’s nuclear programs in the wake of North Korea’s actions to terminate its obligations under the Nuclear Non-Proliferation Treaty and the 1994 U.S.-North Korean Agreed Framework. In the six party talks, North Korea demanded that in return for a North Korean “freeze” of its plutonium nuclear program, the United States agree to a number of U.S. concessions, including removing North Korea from the U.S. terrorism-support list.

In late 2006 and early 2007, the Bush Administration reportedly offered North Korea removal from the U.S. terrorism list if North Korea agreed to end its nuclear programs. U.S. and North Korean diplomats negotiated much of the Six Party Nuclear Agreement, which was signed on February 13, 2007. That agreement specified that the United States and North Korea would begin to negotiate a process of removal of North Korea from the terrorism list. In August-September 2007, Assistant Secretary of State Christopher Hill apparently made promises to North Korea’s chief negotiator to remove North Korea as part of the process to implement Phase Two of the February 2007 nuclear agreement. They set a deadline of December 31, 2007, for completion of Phase II. Phase II requires North Korea to allow the “disablement” of its plutonium facilities at Yongbyon and to issue a declaration of its nuclear programs. The Bush Administration increasingly took the position that the issue of North Korea’s kidnapping of Japanese citizens was not linked to removing North Korea from the terrorism list, from the standpoint of U.S. law or policy. The Japanese government objected to this position. The State Department continued to declare that North Korea had not committed a terrorist act since 1987. However, reports from French, Japanese, South Korean, and Israeli sources described recent North Korean programs to provide arms and training to Hezbollah in Lebanon and the Tamil Tigers in Sri Lanka, two groups on the U.S. list of international terrorist organizations.

If the Administration removes North Korea from the terrorism list, it is required under law to notify Congress 45 days prior to removal. For Congress to prevent removal, it would have to pass legislation (not resolutions) that would be subject to a presidential veto. The Administration has stated that it will adhere to the requirement of providing Congress with a 45-day notice.

Read the full report here
Read other North Korea CRS reports here

North Korean Economy Watch has been named Most Specialised Niche Newcomer  by Aaron Schiff on his list of top 200 economics blogs.

See the full list here.

Thanks to all the readers out there. 

Apologies
In the last couple of weeks, this web site suffered a near-fatal technical blow.  Some information was lost, but nothing that can’t be repaired.

Google Earth Users
If you are a user of North Korea Uncovered (North Korea Google Earth), you will need to download Version 8 (here) to get all the latest updates as well as corrected technical problems associated with the switch to the new system.

RSS subscribers
If you subscribed to this blog on RSS, you will need to updated your RSS feed with this URL.

Appreciation
The creator of DPRK Studies stepped up to the plate and rescued this site from what could have been a sad ending.

I also want to thank the editor of The Fly Bottle for doing his part to save things as well.

Both of these guys have very busy schedules, so I am in their debts for turning things around so well.

Posting will resume shortly.

Daily NK
Yang Jung A
1/3/2008

Through its publication “North Korea is Changing” the Korea Institute for National Unification (KINU) highlighted numerous changes and reforms that have occurred in North Korea due to the 2002 “July 1st Economic Maintenance Reform Policy” (Hereon referred to as the “July 1 Policy”). This publication deals with the changes the North Korean economy is undergoing following the economic crisis of the 1990s, and expounds on the country’s prospects for future economic reform.

The following is a summary of the main points introduced in the publication.

The “Invisible Hand” at Work in North Korean Markets

Following the enactment of the July 1 Policy in 2002, agricultural markets transformed into general markets. Soon, industrial products were being sold alongside agricultural products as the free market spirit spread to the country’s distribution system.
Along with the rise of general markets, street markets, and individualized commercial activities, a new merchant class is emerging. People who are able to put to use business acumen and an understanding of market principles are able to accumulate personal wealth. This demonstrates that aspects of Western-style rationalist thinking, including the pursuit of profit-seeking are being instilled in the minds of the North Korean people.

It is difficult to say if this experiment in free market economics will be successful in the long run. More than anything, due to the rigidity of the North Korean regime, the realm in which the “Invisible Hand” can operate is greatly restricted. This is the fundamental paradox facing North Korea’s prospects for reform and opening.

“Hardworking Heroes” Become “People with Two Jobs”

As the economic difficulties became severe, work opportunities evaporated. Living off of the wages provided by the state became impossible. North Korean laborers responded to this by taking on side jobs or engaging in independent sales.

According to defectors living in South Korea, after the July 1 Policy, there has been an increase “People with Two Jobs.” These are people who are engaging in economic activities additional to their primary occupations. People are beginning to accept the notion that it is better to work for personal benefits than to receive the title of “Hardworking Hero.”

Such phenomena have also changed people’s perceptions about occupations in general. For example, the elite classes now prefer diplomatic positions and jobs where they can make international connections, rather than working in party or government positions. The common people prefer agricultural jobs with the benefits of access to the food distribution system and the ability to earn side profits by being a merchant. In addition, common people also prefer being personal drivers, photographers, workers at the Food Distribution Office, servicepersons, or fishermen.

Business Conglomerates Are Emerging in North Korea

With the implementation of the July 1 Policy, North Korea has witnesses the creation of its first business conglomerates. A case in point is the Korea Pugang Corporation, which has expanded to include 9 subsidiaries and 15 foreign offices engaging in various lines of work. The website of the “Korea Pugang Corporation” reveals that the company has around $20 million in capital and does an average of $150 million of business each year.

The executives in charge of the company’s growth are brothers Jon Sung Hun and Young Hun. President Jon Sung Hun is in his early 50s and studied abroad in Tanzania before returning home to teach English at Kim Il Sung University. He later became a businessperson. His English skills are among the top 10 in North Korea. Young Hun is in his 40s and is the president of a company affiliated with the Finance and Accounting Department of the Workers’ Party. His company dominates North Korean diesel imports.

If the Jon brothers are the representative examples of conglomerate-based new capital, Cha Chul Ma ranks high among those who earned capital due to their power in North Korean society. With his focus on doing business with China, Cha is known for his ability to earn foreign currency and dominates the foreign currency earning businesses belonging to the Standing Committee of the Supreme People’s Assembly. His personal wealth is said to be over $10 million.

As the son-in-law of Lee Jeh Gang, the First Vice Director of the Guidance Department of the Workers’ Party, Cha gets some support from his father-in-law. Cha, who is known to live so freely that he was seen wearing Bermuda shorts on the streets of Pyongyang, is said to be a “Representative Case of a North Korean who succeeded in business on his merits, regardless of assistance from surrounding figures”.

The Number One Worry is Sustenance

North Koreans are said to live three different lives: their family lives, their working or school lives, and their political lives. Their lives are organized by politics from “cradle to grave,” and they must attend various political meetings, organizations, and study sessions. However, there are many people who are unable to participate in regular meetings of their political units due to economic difficulties. As they do not receive sufficient food distributions and their wages are too low, they must seek their food independently through individual economic activities.

Because the transportation infrastructure in the country is not advanced, it takes at least half a month to one month to go into the countryside to search for food and then they must return and sell the food or daily-use items they acquired, leaving little time for any other activities. Ninety percent of North Koreans engage in some form of business, and as a result, only an estimated 30% to 60% participate in required political activities.

Marriage Culture

These days, in North Korea, the ideal spouse is the one who makes the most money. Previously, when North Korean women chose their spouses, they considered the social status of their potential suitor. However, after the economic crisis, they started to prefer businesspersons and people who earn foreign currency, instead of discharged soldiers and cadres. For men as well, they now prefer money to looks as society increasingly revolves around the economy. As a result, an overwhelmingly higher proportion of men marry older woman than before.

Marriage customs are simplifying as well. Before the economic crisis, women usually provided the domestic items for the household and men provided the estate. However, after the economic crisis, dowries have downgraded into simple things like clothes. Because the allocation of estates has been delayed, more and more people are living at their parents’ homes.

Especially for women, there have been some phenomenal changes. Many women consider marrying late or not marrying at all. Reasons for this include the fact that woman cannot marry men just because the men can’t work and needs a woman to bring home money. Even in such a patriarchal culture, such complaints are becoming increasingly common.

Good Friends claims that a prestigious local politician has been executed for his bourgeois lifestyle…

(excerpt)  A cooperative farm chief who was once honoured by North Korea’s founding president has been publicly executed for starting a private farm to support his luxurious lifestyle, a South Korean aid group said Thursday.

The unidentified man — said to be a member of the national legislature — and two colleagues were put to death by firing squad on December 5 in Pyongsong City, 30 kilometres (20 miles) north of Pyongyang, the Good Friends group quoted sources as saying.

The farm chief, his accountant and the local county’s party secretary were accused of selling produce from an unauthorised farming operation to lead a luxurious lifestyle, said a newsletter from the group which provides aid to the hardline communist state.

The farm chief was accused of failing to register 196 acres (79 hectares) of farmland that had been cultivated over the past decade. He allegedly fed retired soldiers with the produce and used them as his private bodyguards.

The man “acted like a king” in Mundok County and had been deemed untouchable because of his status and the gang of retired soldiers who followed him everywhere, Good Friends said.

All those put to death were said to have lived in upmarket two-storey homes and driven illicit cars.

Read the whole story in the AFP here
1/3/2008

Daily NK
Kim Min Se
10/26/2007

There is a prospect of the rise of “second food crisis” next year because of the flood disaster and the resulting food shortage.

A senior researcher at Korea Rural Economic Institute, Kwon Tae Jin said warningly, “Unless North Korea comes up with a special plan to secure food supply, there will come another food crisis next year, which is as severe as the one in the mid and late 1990s.”

Kwon anticipated that North Korea would need 5.2 million tons of grain for domestic consumption. Unfortunately, it is expected that North Korea would produce around 3.8 million tons of grain. This means there will be a shortage of 1.4 million tons of grain.

The statistics indicates there is a real possibility of a food crisis. North Korean authorities announced that the flood inundated about 2.2 billion ㎡ of farmland, which accounts for 14 percent of the country’s farmland. It is estimated that 2.2 billion ㎡ of farmland produces at least 500,000 tons of grain.

However, another prospect says that although food shortage is inevitable, it will not lead to mass starvation in North Korea as it did in the mid-1990s. Most of defectors from North Korea said, “Since the mid-2000s, things have changed. There won’t be any serious starvation.” They said that the current situation is different from that of those days under the central food distribution system. They added that the Jangmadang (markets) economy has changed a way for life among North Korea people.

◆ The amount of demand for food is overestimated

It should be double-checked whether North Korea really needs a minimum of 5.2 million tons of grain. There is criticism that the estimate of food demand which was calculated by some South Korean experts on North Korea and relief organizations is unrealistic. It is also pointed out that the estimate is calculated based on the nutrition standard of South Korea.

Defectors said that mass starvation would not have occurred if North Korea had at least a half of 5.2 million tons of grain in the mid 1990s.

Although the international standard for daily nutritional intake is between 2,000 and 2,500 kcal/day, North Korea sets the standard at 1,600 kcal/day, which amounts to 450 grams of grain.

It is easy to estimate the minimum amount of food demand needed in North Korea. Let us say every individual including children and the elderly needs 550 grams of grain per day, which is equal to the daily amount of food distributed to every adult by the state. With the population of 22 million in North Korea, the country then needs 12,100 tons of grain each day and 4.4 million tons of grain per year.

It is known that the North Korean government provides 550 grams of grain for adults and 300 grams for both children and the elderly. According to CIA’s World Fact Book 2004, the population aged between 15 and 64 in North Korea is around 15 million, which accounts for 67.8 percent of total population. This means the population of children and the elderly together reaches about 7 million. If we do the math, we come into conclusion that the amount of food needed in North Korea every year is 3,777,750 tons of grain.

Recall that North Korean people had received the aforementioned amount of food through the state food distribution until early 1990s. Of course, the country did not suffer from mass starvation back then.

The mass starvation during the mid-1990s resulted from huge decrease in food production between 1994 and 1998. In those years, North Korea produced about 2 million tons of grain, which fell far below the needed levels of food production. Hwang Jang Yop, former secretary of the Worker’s Party also testified that in the fall of 2006, while he was still in North Korea, he once heard the secretary of agriculture Seo Kwan Hee worrying about extremely low food production.

Therefore, it is correct to estimate the minimum amount of food needed in North Korea at 3,777,750 tons of grain. If the food production decreases below 3 million tons, then the food prices will skyrocket, and the possibility of mass starvation will be increased.

◆ A New way of life among North Korean people helps prevent them from falling victim to starvation.

North Koran people do not believe in the state authorities any more. The people know that they suffered from horrible starvation because they relied on the state and its food distribution system. During the crisis, many people had desperately waited for food to be distributed until they collapsed and died. Nowadays, North Korean people find a means of living by themselves at Jangmadang.

“There is no free ride” is the words on everybody’s lips in North Korea, which means that everyone must work hard in order to make a living. The lowest class became a day laborer.

The mass starvation of the mid-1990s has brought a significant change into North Korean society. Except a few, most of North Korean people do not rely on the state’s food distribution system. Instead, they have come up with a variety of survival techniques such as engaging in business, illegal trade with China or real estate transactions, receiving support from defected family members, and house sitting.

In that manner, North Korean people make money and use it to buy rice. An affiliate at the Bank of Korea who studies price trends of North Korea said, “Since the adoption of the July 1 Economic Improvement Measure, the price of rice and corn has increased the least.” If the prices go up, people would tighten their belts and decrease their spending on every item except rice. This means they are not that vulnerable to starvation as they used to.

◆ Businessmen are good at securing food.

Recently, a number of rich businessmen have emerged. Some have tens of thousands dollars, and others as many as several million dollars. Groups of Jangmadang businessmen have been organized with these rich businessmen as the leaders.

These businessmen come and go to China as they please and supply food and goods to Jangmadang in North Korea. If the rice price in North Korea is expensive than in China, they buy Chinese rice and sell it at Janmadang. In this way, they help balance supply and demand at the market.

Furthermore, Chinese residents in North Korea and Chinese businessmen also joined the North Korean businessmen as providers at the market. They too sell food produced in China at Jangmadang when food prices go up in North Korea. If possible, they even sell rice reserved for the People’s Army. There was an accusation that the state authorities supplied food aid from overseas for the People’s Army while collecting food produced in North Korea at the same time.

Of course, some businessmen could deliberately keep a hold on food supply anticipating an increase in food prices. However, that kind of unfair activity is temporary. Although it is too early to tell, the “invisible hand” of the market, however small it is, is operating in North Korea and acting as a preventive measure against starvation.