North Korean State Party’s CC meeting: of fired officials and coronavirus efforts

March 2nd, 2020

By: Benjamin Katzeff Silberstein

On Saturday February 29th, the Political Bureau of the Central Committee of the Korean Worker’s Party held a so-called “enlarged” meeting. According to the KCNA report, the meeting dealt primarily with purges of corrupt officials, and coronavirus measures:

At the enlarged meeting acts alien to the party, abuse of power, practices of privileges, indulgence in bureaucracy, corruption and irregularities revealed among senior officials of the Party Central Committee and officials of the Party cadre training institution were harshly criticized and their gravity and consequences were sharply analyzed.

The Supreme Leader clarified the analysis of the issues by the Party Central Committee and its stand on them, and dealt strong blows at the acts alien to the party and unpopular and anti-socialist acts brought up for discussion at the meeting. He called on all the Party officials and organizations to draw a serious lesson from the recent incident, to make steady efforts to revolutionarize themselves and their units and bring about a new turn in the Party work.

The Political Bureau of the Party Central Committee dismissed Ri Man Gon and Pak Thae Dok from the posts of vice-chairmen of the Party Central Committee.

The meeting adopted a decision to disband the party committee of the Party cadre training base which was involved in the practices of corruption and irregularities, and to impose relevant penalty.

It’s not clear precisely what “strong blows at the acts alien to the party and unpopular and anti-socialist acts”, but presumably it refers to corruption. Corruption is one of the most common acts for WPK-officials to get purged (or fired) over, and the formulations indicate that this is indeed what happened here. Some have suggested it may have had to do with shoddy work in the country’s coronavirus measures, but even reading carefully between the lines, I can’t see enough evidence to back that up. “[A]cts alien to the Party” [비당적 적행위],  I would argue, is a clear statement about specific acts particularly alien to the Party’s values. Shoddy handling of specific policy implementation related to the virus does not fall naturally into that category. Moreover, the antivirus measures were praised at the very same meeting. North Korean politics is full of contrasts and mixed messages, but this would be a stretch too far.

The problem with these methods, of course, is that they do nothing to address the long-term issue of corruption. The WPK (and the North Korean state for that matter) lacks institutions for accountability and independent oversight. There is no proper justice system in any reasonable sense of the term. So scare campaigns and setting examples, like the CC meeting in question did, really is the only avenue available. These measures might have some positive impacts in the short run – we don’t know – but in the long run, they make little difference. Kim Jong-un has ostensibly made anti-corruption a priority, but so far, campaigns and sporadic crackdowns are the only visible results. Corruption is obviously bad for the economy, but if it helps people get around draconian laws (as is the case in North Korea) to do business, it might be a net positive for the economy.

The meeting also dealt with North Korea’s efforts to contain the coronavirus. There’s a lot to say about the text, I’ve highlighted (in bold) the part relating to economic affairs:

Discussed at the meeting were issues of taking nationwide top-class anti-epidemic steps in a more thorough-going way and strictly putting them into practice in order to cope with the viral epidemic spreading rapidly around the world.

In case the infectious disease spreading beyond control finds its way into our country, it will entail serious consequences, the Supreme Leader said, noting that the strong measures taken by our Party and the government from the beginning have been the surest and highly reliable, preemptive and decisive preventive measures as this viral infection spreads so rapidly, its incubation period is uncertain and its contagion route is also scientifically uncertain.

An urgent task at present is to supplement and complement the law on the state emergency anti-epidemic and to readjust state crisis control regulations in an orderly way, the Supreme Leader said, emphasizing that the Presidium of the Supreme People’s Assembly, the Cabinet and other related institutions must further strengthen the state anti-epidemic force immediately and push ahead with the work for supplementing and complementing anti-epidemic means, system and laws based on the experiences gained through the on-going enforcement of preemptive and powerful anti-epidemic measures to cope with infectious disease.

The enlarged meeting also discussed measures to deter the influx and spread of the infectious disease in a scientific, preemptive and lockdown way.

No special cases must be allowed within the state anti-epidemic system, the Supreme Leader said, stressing the need to set up a strict discipline by which all the fields and units of the country unconditionally obey to the command and control of the Central Headquarters for the emergency anti-epidemic work and thoroughly execute instructions from it, and to further tighten the system of reporting to the Party and legal surveillance.

He instructed the Cabinet and the Central Emergency Anti-epidemic Headquarters to seal off all the channels and space through which the infectious disease may find its way, and strengthen check-up, test and quarantine under the work system and order already in place.

The meeting also stressed the issue of tightening economic organization and anti-epidemic work under the prevailing situation and conditions so as to accomplish this year’s goals without fail and to thoroughly ensure the life and security of the people.

It is important for the Party organizations at all levels to have clear understanding of the intention of the Party Central Committee and put it into practice, the Supreme Leader said, urging the need for the Party to provide an impetus so that the Cabinet and the economic institutions at all levels could provide proper economic operation and command under the present situation.

The anti-epidemic measures being taken by us is a crucial state affair for the defence of the people and a heavy responsibility of the Party Central Committee, not just the prevention of the disease, the Supreme Leader said, underlining the need for all to thoroughly carry out the decisions and instructions of the Party Central Committee and direct all-out efforts to the security of the country and the life and safety of the people.

The question is, of course, what this means in practice. There is no doubt that the economy is suffering, and not just in terms of sheer growth numbers or the like. Much of North Korea’s imports from China are blocked due to the border closure, and even smuggling is facing heavy clampdowns. Internal travel and movement of goods is heavily restricted. There is, it seems to me, fairly little that the state can really do to balance this all in terms of economic measures, but of course, the state must tell the population that it is doing things and taking action.

(Source: Korean Central News Agency, “Enlarged Meeting of Political Bureau of C.C., WPK Held,” 29/2/2020.)

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North Korea strengthens internal travel restrictions to keep the coronavirus in check

February 28th, 2020

By: Benjamin Katzeff Silberstein

Daily NK  has reported on the travel restrictions inside the county before, as this blog has covered here and here. This recent report goes into greater detail:

“The No. 2 departments in local Ministry of People’s Security [MPS] offices are placing further restrictions on the issuing of travel documents, and the authorities are cracking down on vans shuttling people around for money,” a Kangwon Province-based source told Daily NK today.

“No. 10 sentry posts [managed by the Ministry of State Security, or MSS] are cracking down on buses and other vehicles moving people. Even local police stations have setup temporary checkpoints to conduct crack downs on vehicles transporting people,” the source added.

It seems like we’re not talking about a blanket ban on travel across provincial borders per se. Rather, the state is banning and heavily restricting certain forms of transportation, especially unauthorized kinds (which otherwise are often  tacitly tolerated, not least through institutionalized bribery). This, too, impacts market trade since the transportation sector is crucial to shuttling goods around the country.

The authorities are thoroughly preventing any vehicles or people from transiting from the border region to the interior of the country and the other way around, sources told Daily NK.

Sources said that anyone who has entered the country from abroad but doesn’t have a document certifying they have been tested for the coronavirus are restricted from travelling. Merchants without proper travel documentation are also reportedly being targeted by the authorities. Even work units involved in construction projects are being restricted from moving around, sources said.

[…]

No. 2 departments in local MPS offices are restricting the issuance of travel documents to everyone unless they are on government orders, Daily NK sources further reported.

Even factory officials who need to travel to other places of the country to collect raw materials have been told to wait until “later” (after the COVID-19 crisis passes over), sources said.

The authorities are also carefully checking container trucks and the baggage compartments of buses for people hitching a ride in these hidden spaces, they added.

There are gaps, however, in the lock down on travel that the authorities are trying to implement.

“Some vehicles, including taxis, are cleverly selecting routes to avoid checkpoints,” the Kangwon Province-based source said.

“People are wearing masks just to avoid getting stopped by the authorities,” he added.

The border regions are of course especially targeted. The state knows it cannot fully close the border shut and thus needs internal controls to be forceful. The mention of certification of testing is interesting and implies that there are ways individuals can take action to test themselves. Perhaps it refers to the medical test teams reportedly dispatched to the border to China.

“There are a lot of ‘storm troopers’ in Kangwon Province who hail from all over the country, which means there’s a lot of people moving around,” the Kangwon Province-based source said. “The authorities can’t completely shutdown the province from the outside because the shock troops need to move supplies into the area for construction projects, but they are setting up multiple check points to block as much traffic as they can.”

The state still needs to continue running its daily affairs, and it’s unclear to what extent construction projects and other things that may be hampered by internal controls have been put on hold. This must be a bureaucratic nightmare to coordinate and often, one hand of the state doesn’t know what the other is doing.

Article source: Kang Mi Jin, “N. Korea further strengthens restrictions on domestic travel,” Daily NK, 27 February 2020, accessed 28 February, 2020.

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North Korea and the coronavirus: why internal controls may be working

February 25th, 2020

By: Benjamin Katzeff Silberstein

At this point, it seems unlikely that not a single case of the coronavirus would have reached North Korea, despite government media claims. The border to China is quite porous even when controls are tight, and the provinces bordering North Korea had seen, as of last week, some 200 cases. The government has ordered schools shut for one month starting five days ago, on February 20th. Unsurprisingly, it has taken special care to protect Pyongyang from the virus, and face mask distribution goes first to the one percent.

The economic effects of all this are very troubling. As this blog has previously noted, markets and society overall seem to be taking the border closure much more seriously than sanctions, and have reacted with much more anxiety than when new rounds of sanctions measures have been levied by the international community in the past. Prices have climbed quite drastically, as we shall look at in some detail in this post. They have risen by much more in Hyesan than in the rest of the country, which tells us something interesting about the government’s internal controls. That differences in market prices are increasing could be a sign that internal controls on travel across provincial boundaries are being enforced quite effectively. When traders cannot as effectively move their goods to where demand is the highest, prices will increase. One also has to bear in mind that Hyesan is very dependent on trade with China to begin with, and we should therefore expect prices there to increase disproportionately.

(My apologies for the awkward look of the graphs — please click for full size!)

In normal times too, prices tend to be higher in Hyesan than in other cities. But usually not by that much. Notice what happens around  January, though: prices skyrocket all over the country but they do so by much more in Hyesan.

This is particularly evident when we look at price differences. Normally, prices are between 5–10 percent higher in Hyesan than in both Pyongyang and Sinuiju. Since the border closure, however, they have gone beyond 20 percent over both cities, according to price observations from the past few weeks. 
Again, the border closure to China may be a central part of the explanation. But rice itself isn’t typically a good that North Korea relies so much on Chinese imports for. We don’t know the precise proportions, but likely, most rice consumed in North Korea in an ordinary year is grown within the country. A likely conclusion is, therefore, that the closure of provincial borders within North Korea is being enforced with some efficiency, making it much more difficult for market traders to transport goods such as rice between different markets in the country. This adds to the already stark economic difficulties from the closure of the border to China. Many other prices have risen drastically as well: gas prices in Hyesan are now 46 percent higher than in late December of last year, and 38 percent higher in the country as a whole. The government has attempted, reportedly with some success, to institute price controls on the markets, but as the story goes with such state attempts in general, they are unlikely to last as black markets arise to respond to shortages.

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Almost a year after the alarm bells: following up North Korea’s food crisis (and an aid success story?)

February 20th, 2020

By Benjamin Katzeff Silberstein

There exists two very radically different narratives on North Korea’s food situation and harvest of last year. The strangest pat of the story is that the state, likely through its different arms, are able to hold both stories at once. The first was the one trumpeted out by the North Korean government and international aid agencies last year (as well as some scholars), that North Korea was facing a famine. The second one is from Kim Jong-un’s plenum speech in late December, where he claimed that North Korea’s harvest was the largest one “on record“.

The Red Cross (IFRC) released an assessment report last month, and though it leaves many questions unanswered, it’s a fascinating and much more detailed read than most assessments of North Korea’s food situation over the past two years. I list some of the highlights below.

First, the most remarkable finding of the report is perhaps how big of a difference aid and support to irrigation can make. I have previously written that the most likely reason the food situation turned out better than expected is that China stepped in with aid. This still seems to be the most plausible scenario, but it is also possible that aid came not in the form of food deliveries, but in equipment and fuel for irrigation, most likely it was a mix of both. If the report is to be believed, and I see no reason to doubt its veracity and methodological grounding, we can extrapolate that improving irrigation can more than double harvests in certain environments. The table below comes from page 5 of IFRC, “DPR Korea: Drought and Food Insecurity Final Report DREF Operation n° MDRKP013,” 17 January, 2020, http://adore.ifrc.org/Download.aspx?FileId=286144, accessed February 20, 2020:

(Note: mt/ha = metric ton/hectare. Click to enlarge.) 

As the table shows, expected versus actual harvests of early crops more than doubled in three of the communities surveyed. One farmer interviewed in the report says that thanks to the IFRC water pumps, their harvest was the best in a decade in the end, and not the worst, as the international community first projected. The total cost of the operation was the equivalent of less than $250,000 for a strong impact on communities holding 34,414 people. Scale that up by 100 and we have $25 million for measures that could drastically help around 3.5 million people. And so on and so forth. Of course, this isn’t a precise or grounded calculation by any means, but it does give a sense of the proportions at hand. $25 million is a third of what North Korea spent on tobacco imports from China last year. Remedying difficult farming conditions isn’t necessarily all that expensive, but can be very, very effective. (Before drawing any certain conclusions from this, do be sure to read the report. It highlights the specific conditions of the localities in question.) It is often said that North Korea’s geographical features make it naturally inhospitable to agriculture and food production, but efficiency and capacity could be vastly improved through investments in agricultural infrastructure.

Second, even with the improvements that came after the initial food crisis alarm bells, none of them make it even remotely likely that Kim Jong-un’s claim of the “best harvest on record” was true. The report highlights some of the difficult weather conditions the country faced in 2018 and 2019. For example:

The agricultural production this yea r(2019) in DPRK was seriously impacted by the after-effects of the droughts that have occurred consecutively over the past 5 years.The situation was worsened by th elittle snowfall last winter and almost no rainfall in the 1st quarter of this year. The unusually low levels of precipitation continued in April and May,combined with higher than usual temperatures. As a result, the water levels in the reservoirs are much lower than normal. These conditions have remained the same during the summer months.

(Source: p. 3 of the report.)

Third, the report raises several intriguing questions about the IFRC in North Korea. To the best of my understanding, the IFRC has a chapter in North Korea but like all organizations in the country, it is for all intents and purposes a government entity. The report references its personnel several times — ” DPRK RCS has a good volunteer network established in these areas” (p. 2), “the team also coordinated with and consulted the Red Cross branches, local authorities, and the State Hydro-Meteorological Agency” (p. 2), “workshop…with community people” (p. 8), et cetera — and it would be very interesting to learn more about how the organization functions on the ground, how its staff are recruited, what “volunteer” actually means, et cetera.

Notwithstanding the questions that reports such as this one give rise to, they are crucial resources for knowledge on North Korean agriculture and food production.

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How the coronavirus may impact the North Korean economy (Updated 18/2/2020)

February 13th, 2020

By: Benjamin Katzeff Silberstein

Yesterday (February 12th), North Korea announced it is prolonging its self-imposed isolation to protect the country from the coronavirus. KCNA:

The spread of the epidemic comes to be a serious problem with the possibility of international disaster.

In this regard, the Non-Permanent Central Public Health Guidance Committee of the DPRK discussed the issue of prolonging the isolation period and strictly enforcing it in order to completely cut off the inroads of Covid-2019 and ensure the life of the people and safety of the state, and submitted it to the Presidium of the Supreme People’s Assembly

The Presidium of the Supreme People’s Assembly of the DPRK examined, approved and decided the proposal of the Non-Permanent Central Public Health Guidance Committee according to the law on prevention of epidemics.

According to the decision urgently adopted at the SPA Presidium, the isolation period in the territory of the DPRK shall be prolonged to 30 days for the time being.

All the institutions and fields of the state and foreigners staying in the DPRK should obey it unconditionally.

The KCNA website doesn’t allow for direct links, but the above was published on February 12th at their website. The country’s quarantine seems to amount to a near-total shutdown of cross-border traffic. So far, North Korea has not confirmed any deaths from the virus, but sources from inside the country have claimed that at least a handful of people have died from the virus. It seems highly doubtful that these sources could know for sure that the coronavirus, and not regular pneumonia, was the cause.

The government’s measures are rather stern, but a border shutdown is perhaps the most reasonable measure the government can take since it doesn’t have the resources to properly monitor the situation inside the country. KCNA also reported on February 12th that the local Red Cross “organized training courses for Red Cross volunteers and sent them to relevant areas.” A press statement (not on their website) from the Red Cross confirms this and says that the “Red Cross has also sent volunteers on bikes to these remote areas to share coronavirus awareness messages.” (Updated Feb 15 2020 with link to the press statement.)

How is all this impacting the North Korean economy? We don’t know for sure, but here are some possibilities:

The markets appear to be under a great deal of pressure. The border trade shutdown isn’t exactly total, as items such as fuel is likely still coming through pipelines. Certainly, some other goods are getting through as well, we just don’t know how much. But most consumer goods are kept out, and the authorities are even cracking down heavily on smuggling that it usually turns a blind eye to, resulting in drastic price rises over the past few weeks. According to some reports, perhaps exaggerated, economic activity is at a virtual standstill along the border. Prices have not reacted this strongly to any sanctions-related measures throughout “maximum pressure”, or really any international event that I can recall. All this points to the border closure measures being seriously and strictly enforced. The ban on tourism is also a significant blow to the economy. Tourism from China has been growing steadily as a source of income for the past few years and it’s a particularly crucial revenue stream of foreign currency at a time when many others have dried up in the wake of sanctions.

In addition to the international border crossing, the government has also banned travel between regions inside North Korea, to prevent the virus from potentially spreading through the country. One has to assume that this ban is at least as strictly enforced as the one on the Chinese border. If so, internal market trade may well be  severely hampered, as traders can no longer easily move goods between regions. This would obviously be a big problem, particularly for agricultural goods but also for the manufacturing sector. The North Korean market economy, which a majority of North Koreans are in some way dependent upon for their consumption, needs a well-functioning transportation network to operate with even a minimum level of efficiency. It is no coincidence that transportation as a sector has gone ahead of many others in North Korea’s marketization process. The government has now reportedly instituted price controls. These are unlikely to be respected perhaps even in the short run, and certainly will not be in the longer run. More traders will sell on the black markets, which will grow perhaps beyond any scope they’ve been since the early 2000s when the state began incorporating the markets into the official system.

One North Korean source quoted by Radio Free Asia puts the government’s dilemma regarding the virus and the economy brutally but clearly:

According to the third source, the poor are angry that the rich care about their health, but don’t seem to care if they have eaten.

“They say they might die from a disease, but they could also die from starvation because they are unable to make enough money to support themselves for a day,” said the third source, adding that the working class say there is no difference between the two because they are dead either way.

At the end of the day, there will come a time when keeping the border shut and domestic travel and transportation paralyzed just won’t be worth it or even possible, at least without massive humanitarian aid coming in to compensate. Something will have to give eventually, and when it does, the real challenge of virus containment may truly begin.

Update 18/2/2020:

Reuters reports that North Korea seems to be planning to hold the Arirang mass games by August, counting on the virus crisis to have eased by the summer:

The Mass Games are due to return on August 15, which is celebrated as Liberation Day on the anniversary of Japan’s defeat at the end of World War Two, Young Pioneer Tours, which runs tours to the North, said in a statement.

Despite the name, the Mass Games are large performances involving tens of thousands of dancers, gymnasts, martial artists and singers acting out familiar propaganda themes.

Another firm, Koryo Tours, quoted sources in North Korea as saying the games were expected to be held over major holidays, perhaps starting on August 15 and including October 10, the 75th anniversary of the founding of the ruling Worker’s Party of Korea.

No further details were known, and tickets are always sold on site rather than in advance, said Koryo Tours general manager Simon Cockerell.

“Tourists still can’t enter North Korea but when the virus issue dies down the border will open again,” Cockerell told Reuters. “It’s a reactive policy, so it will depend on what happens in China, basically.”

North Korea revived the Mass Games in 2018 to sell an image of international engagement and peace while raising much-needed foreign currency.

Source: Josh Smith, “North Korea looks to hold ‘Mass Games’ this year despite coronavirus fears: tour companies,” Reuters, 18/2/2020.

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North Korea’s coronavirus border shutdown: “Nobody is to come into contact with Chinese people”

February 5th, 2020

By Benjamin Katzeff Silberstein

North Korean authorities seem to have basically ordered the country’s border to China shut entirely in response to the coronavirus outbreak, though it’s still unclear to what extent these orders are being implemented. Reuters:

“They’re keeping the cargo out and they’re keeping the Chinese out; nobody can go in or out,” said one source with firsthand knowledge of the situation at the China-North Korea border.

Kang Mi-jin, a North Korean defector in Seoul who reports for the Daily NK website, also confirmed that the border appears to have been almost entirely shut down since at least Jan. 30.

“The Ministry of People’s Armed Forces ordered all guard posts to bar smuggling as well,” she said. “People, freight, nothing can come in or go out.”

Pyongyang has reportedly asked Beijing not to repatriate North Korean defectors detained in China, according to one South Korean pastor who works with refugees.

According to the source with knowledge of the situation at the border, North Koreans who work in restaurants and elsewhere in China, violating United Nations sanctions, are in “virtual captivity” in their homes under instructions from authorities back in North Korea.

North Korea is typically adept at implementing public health interventions and acted “swiftly and decisively” to try to stop the disease from entering the country, but sanctions restrictions could make it difficult for them to get medical supplies, said Harvard Medical School’s Kee Park, who has worked on health care projects in North Korea.

“Their actions, very costly in terms of revenue from tourists and trade as well as administratively for quarantining people, reflect their concerns regarding their health system’s capacity to handle an outbreak,” Park said.

The efforts – which appear to have been successful in preventing any cases in North Korea so far – mean North Korea has severed or drastically restricted the economic ties it relies on.

“There could be a huge impact not just on the North’s market economy, but also on the entire economy of the country,” Kang said. “North Korea promotes localization, but even for products – candies, crackers, or clothing – manufactured in the country, the raw materials come from China.”

Upcoming North Korean political holidays, which usually include gifts of sweets and crackers for children, may be more less festive than usual if the country’s supplies of sugar, flour, and other ingredients are scarce, she said.

Source and full article: “Burdened by sanctions, North Korea sees coronavirus threaten economic lifelines,” Josh Smith, Reuters, 4/2/2020.

Daily NK reports similar that the government has, quite incredibly, shut the crucial Sinuiju port for shipments to and from China:

Daily NK sources reported that with the port’s shutdown, maritime transportation of goods near the Sino-North Korean border have completely come to a halt.

“All the harbors at Sinuiju Port, which were open until at least Jan. 24, have been completely shut down as of Jan. 25,” a North Pyongan Province source told Daily NK on Friday.

“Authorities are prohibiting the movement of both personnel and goods to stop the coronavirus from entering the country,” he added.

Daily NK sources explained that ships leaving for sea must normally receive a confirmation document and undergo a series of inspections at port customs, but all the customs offices are currently closed and all the boats are docked.

Sinuiju Port, which sits opposite the Chinese city of Dandong in Liaoning Province, is a hub for smuggling as well as official trade with China.

Government ships charged with clamping down on smuggling on the Yalu River have also halted operations, Daily NK sources reported.

“Since all the boats are docked, all the anti-smuggling boats working along the Yalu River have anchored as well,” one source said. “The military unit overseeing the boats have given orders that ‘nobody is to come into contact with Chinese people.’”

Smuggling along the Yalu River also appears to have largely stopped, according to Daily NK sources.

”The current atmosphere is such that if anyone were to say they were going out to smuggle, they would be branded a traitor,” one source said.

With North Korea constantly emphasizing the danger posed by the Wuhan coronavirus through state media along with intensifying its border security, smugglers are on their toes, Daily NK sources said.

Not only is there a fear of infection, but smugglers are also worried that being caught smuggling while the government is so intensely guarding the border might lead to much harsher punishment than usual.

Article source: “N. Korea shuts down Sinuiju Port amid coronavirus fears,” Mun Dong Hui, Daily NK, 4/2/2020.

The state is taking very serious measures. According to another Daily NK report (in Korean), medical staff has been dispatched to all customs houses along the Chinese border, and are checking the vitals of everyone who enters from China. In the Nampo port, North Korea’s commercially most important one, foreign passengers are forbidden from leaving their ships and entering the country.

As NK Pro reports, tourism is essentially completely banned, and border crossings with China and Russia completely shut aside from outbound movements of people (with some exceptions, as reported here by Daily NK). Goods may still cross by land between the countries. People who have been to China are quarantined for one month.

Predictably, goods prices have soared as a result of the border closings, particularly on manufactured and imported goods from China. Prices for goods like flour have gone up by 47 percent since January. This is itself very interesting, since we’ve seen such small or non-existent market price changes following sanctions thus far. The most likely reason is that sanctions actually do not greatly impact most goods that matter to people’s everyday lives, and the North Korean government won’t exactly stop goods from crossing the border. Here, however, the government itself is enforcing a blanket ban on crossings. It’s serious, and reportedly even for smugglers.

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The UNCTAD claim on North Korea’s GDP-growth in 2019

January 18th, 2020

By: Benjamin Katzeff Silberstein

The United Nations Conference on Trade and Development (UNCTAD) estimates that North Korea saw a real-GDP growth of 1.8 percent in 2019. Marcus Noland once wrote that one should not “[…] trust any datum on North Korea that comes with a decimal point attached.” This is perhaps even more true of large-scale, macro figures such as this. For one, you need an estimated inflation rate to calculate real GDP, and I have no idea which number UNCTAD may be using. You can find the figure on p. 178 here, together with a quite optimistic prognosis for 2020 and 2021. Even with that growth, North Korea barely recaps the negative growth of 2018. Let me say again that all of these numbers build on little but more or less qualified guesswork. That’s important to keep in mind since this one line in a UN report graph has made quite a few international headlines already.

Most likely, UNCTAD builds their projections upon the somewhat lower decline in exports in 2019 compared with 2018. It’d be interesting to know if they also take into account the seemingly decreased vigilance in sanctions enforcement by China, and how one could possibly quantify this. More on the possible variables here.

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Did North Korea really see its best harvest “on record last year?

January 17th, 2020

By: Benjamin Katzeff Silberstein

As I and Peter Ward discovered some weeks ago, the claim by Kim Jong-un that North Korea had its “best harvest on record” did not make it into the English-language summary of Kim’s plenum speech put out by KCNA. Several media outlets have picked up on this claim, and that is not surprising. Not even a year ago, last spring and summer, both the North Korean government and UN organs sounded the alarm bells that North Korea’s harvest was so disastrous as to suggest a famine might be looming.

So what happened?

First of all, it should be noted, as always, that one must be extremely cautious in studying data on anything related to the North Korean economy. Most people who follow North Korea are well aware of this but especially when it comes to an issue like this, one cannot be cautious enough.

I focus here on the claim by Kim that the harvest was the best “on record”. It may well have been a good harvest, or at least a much better one than anticipated. This seems to be the case. The only attempt I’ve seen at a numerical estimate comes from South Korea’s Rural Development Administration. They estimate that North Korea’s harvest grew by around two percent in 2019 over 2018. This sounds fairly plausible and could perhaps be explained by weather conditions unexpectedly improving, or fertilizer donations from China, and the like. Or the government and FAO’s projections were simply wrong from the beginning.

To understand why it is so unlikely that this year’s harvest would be the best on record, we have to look at what ‘the record” really says. The following graph shows North Korean harvest figures between 1990 and 2017, as recorded by the FAO. These figures are not independently recorded or verified but, to the best of my knowledge, generated by FAO in cooperation with the North Korean government, or provided directly by the government. Usually, that would be a problem, but here, it’s actually quite helpful since it helps us analyze the claim about the “record”.

Graph by NK Econ Watch/Benjamin Katzeff Silberstein. Data source: FAOSTAT.

I downloaded these numbers from the FAO database some months ago. For whatever reason, I’m unable to access the data at their website at this time of writing, and therefore, can’t fill in the data further back. This data also differs somewhat from other data on North Korean harvests from the World Food Program and FAO. Still, they match quite closely with other data the two organizations have published in recent years about North Korean food production. Again, keep in mind that this data is produced and published in concert with the North Korean government. In that sense, these numbers are the “record”.

Over the past few years, estimated harvests have gravitated between four and five million tons in milled rice equivalent.  (You can read more here about what that actually means.) In 1993, North Korea’s record of harvests notes 7.5 million tons. Harvests hovered around 8 million tons in the 1980s – again, to the best of my recollection, as I can’t access the FAO statistics database numbers of North Korea at this time of writing.

Graph by NK Econ Watch/Benjamin Katzeff Silberstein. Data source: WFP/FAO. 2019 is a projected figure.

For Kim’s claim to be true, therefore, this past year’s harvest would have had to go from around five million tons in 2018, to surpassing eight million tons in 2019. I am no agricultural economist, but Kim would likely need something like a miracle of nature for this to happen. I am not aware of North Korea’s landmass suddenly doubling, for example, or the amount of arable land increasing by one third overnight. Therefore, Kim’s claim is most likely, beyond reasonable doubt, simply not true. Note also that outlets such as Daily NK have reported that the government has taken predatory measures against grain trade as a result of what the outlet describes as “poor agricultural yields”.

In other words, there is very little to back up the claim made by Kim (and subsequently by North Korea-affiliated Choson Sinbo). This claim is a break with a pattern over the past few years, where North Korean media has been very frank – often, probably exaggerating – in describing difficulties and damage caused by flooding and inclement weather. There are several reasons why this may have changed with regards to the harvest. For one, food security a very basic need for any country. With bad food security, North Korea appears weak in the face of sanctions. It would hardly be the first time the North Korean government lied for strategic, propaganda purposes. It is also possible that harvests were much better than anticipated, and that Kim’s claim is merely a strong exaggeration. Perhaps “best on record” should be read as a superlative, rhetorical claim rather than a literal one. At the end of the day, we simply don’t know, and the ways of the inefficient North Korean bureaucracy are mysterious.

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North Korea’s largest fertilizer plant reportedly shut down

November 6th, 2019

By Benjamin Katzeff Silberstein

Fertilizer production is one area where UN sanctions appear to have rather dire unintended consequences. Daily NK reports:

Daily NK reported in February of this year that production at the complex was gradually falling.

UN sanctions and the ensuing ban on the import of oil, a key ingredient in chemical fertilizers, may have also been a factor in the factory’s closure, the source added.

FAILING TO MEET DEMAND

North Korea’s fertilizer production is currently meeting only one third of the country’s total demand. North Korea uses a total of 1.55 million tons of chemical fertilizer per year but only produces about 500,000 tons, Daily NK sources said.

North Korea relies predominantly on imported fertilizer. Farm workers reportedly prefer the fertilizer from the Hungnam Fertilizer Complex because it is superior in quality than fertilizer imported from China. The military was given priority for fertilizer produced at the complex.

The shortage of fertilizer is adversely affecting agricultural production, particularly given that this year’s production of fertilizer has fallen far short of demand, Daily NK sources said.

“Collective farms have had an overall poorer harvest this year compared to the last,” said one of the sources. “Farmers are blaming the lack of fertilizer for the poor harvest.”

UN SANCTIONS HAMPER PRODUCTION

North Korean authorities have made various attempts to normalize fertilizer production. For example, the authorities have installed large ammonia synthesis facilities and introduced 4,000 horsepower compression engines to help increase fertilizer production, Daily NK sources confirmed.

The import of a wide range of machinery and raw materials is banned under UN sanctions, however. Some North Korea observers argue that the ban on these imports only make it harder for North Korea to improve its agricultural production by itself.

“North Korea needs a dependable supply of coal, oil and electricity, and a total revamp of its fertilizer manufacturing facilities to normalize fertilizer production. None of this is possible due to UN sanctions,” a former North Korean agricultural official familiar with fertilizer production in the country told Daily NK. “If the Hungnam Fertilizer Complex remains nonoperational, it is highly likely next year’s agricultural production will be adversely affected.”

WORKERS REASSIGNED TO OTHER PROJECTS

Daily NK sources also reported that some 70% of the workers at the Hungnam Fertilizer Complex were sent to construction sites throughout the country after the complex shutdown. These construction sites included the Wonsan-Kalma Coastal Tourist Zone, the Hamhung-Wonsan highway, and the Tanchon Power Plant. Some workers were even sent to the fields to farm.

“The Hungnam Fertilizer Complex employed more than 10,000 workers. Lots of workers complained after they were sent to do other work following the shutdown,” one of the sources told Daily NK. “Many people wanted to work at the complex because it gave employees a stable supply of rations. That’s all in the past now.”

Article source:
N. Korea’s largest fertilizer complex no longer operational 
Jang Seul Gi
Daily NK
2019-11-06

Note that the article confirms that rations are (at least in this case and most likely usually, if at all) distributed by enterprises as remuneration rather than through PDS centers.

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What explains North Korea’s exchange rate drop? How significant was it?

August 25th, 2019

By: Benjamin Katzeff Silberstein

Over the past few weeks, both Asia Press and Daily NK have reported the North Korean won depreciating against the dollar on the markets.

According to the figures from Asia Press, it seems the won first fell drastically, but that the initial FX-rise was a so-called “overshoot”, a disproportionately high rise of the exchange rate, but later corrected itself to levels more reflective of actual availability of dollars. The Asia Press index rose from 8,593 won/1$ on July 19th, to 9,463 won/$1 on August 6th, to 8,625 won/$1 on August 21st. Asia Press notes that the reason for the dollar appreciation is unclear, and speculates that it may be related to sanctions. That’s true, but it’s unclear what would have changed so suddenly and drastically in sanctions implementation as to cause a sudden rise of around ten percent. All in all, discounting the sudden and very temporary rise,  the exchange rate rose by not even one percent.

Reporting by Daily NK confirms the exchange rate spike reported earlier by Asia Press:

Daily NK conducted a market survey on August 6 that found the price of US dollars in North Korea was 7,850 KPW in Pyongyang, 7,880 KPW in Sinuiju and 7,900 KPW in Hyesan. The price ballooned some 800 to 900 KPW in just two weeks.

North Korea’s currency rate regularly sees significant volatility, but the last time the rate increased by 900 KPW in just two weeks was in 2015. During the second half of 2015, the North Korean authorities conducted harsh crackdowns on Chinese-made products and heightened international sanctions came into effect. The combination of these two factors caused the exchange rate to skyrocket more than 700 KPW.

There were even areas of the country that temporarily saw a spike to more than 9,000 KPW. In Rason, North Hamgyong Province, the exchange rate rose to 9,740 KPW on August 14 but has since retreated to between 8,500 and 8,700 KPW.

A Daily NK source in North Hamgyong Province said that the rising exchange rate may be related to stagnation in North Korea’s domestic markets. “The currency rate changes every day and it rose in August again,” he said. “The spike in the currency rate this year suggests that businesses aren’t doing so well and it may also be due to external factors.”

The source suggested that the external factors include the US-China trade war and China’s recent intentional devaluation of the yuan. For the first time in 11 years, the Chinese yuan broke past seven renminbi to the dollar on August 5.

Source:
USD – North Korean Won exchange rate spikes in North Korea
Kang Mi Jin
Daily NK
2019-08-22

The FX-rate spikes aren’t reported in the Daily NK price index, so it doesn’t even appear in the broader exchange rate graph. The following graph shows the exchange rate from 2015 until Daily NK’s latest report, only a few days ago:

Graph 1. North Korean won/$1, 2015–August 2019. Graph by NK Econ Watch, data from Daily NK price index.

The won has depreciated against the dollar, for sure. Particularly in the short run. The past few weeks have seen slightly more volatility than usual. But still, in the big-picture context, things look fairly stabile.

Graph 2. North Korean won/$1, September 2018–late August 2019. Graph by North Korean Economy Watch. Data source: Daily NK.

A spike such as the one reported earlier in August can happen for many reasons. There is likely so little of US-dollars in circulation in North Korea that fairly minor changes can make a big dent in the market exchange rate. Communications function so poorly in North Korea that rumors spread easily with little possibility for quick confirmations or denials.

I and Peter Ward have previously argued, among other things, that the dollar isn’t a currency of general use in North Korea. The main holders of dollars are, most likely, state-owned corporations and other non-human entities. One move by a major holder could therefore have a significant impact on the market as a whole. The RMB has held completely stabile, so it’s very likely not a matter of any general stress on the markets. Had the source been something related to sanctions implementation, upped pressure, significantly changed expectations, or the like, we should have seen changes in the won-to-RMB-rate as well. As things stand right now, the market exchange rate does not look to be out of its normal range.

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