Seventieth anniversary of ‘The Pyongyang Essential Foodstuff Factory’, symbol of nationalized industry

August 22nd, 2016

Institute for Far Eastern Studies (IFES)

The Pyongyang Essential Foodstuff Factory, important symbol of North Korea’s nationalized industrial sector, celebrated the 70th anniversary of its foundation on August 10, 2016. It was the first factory to come under state management following the adoption of the Major Industries Nationalization Law on the same day.

The official Workers Party of Korea (WPK) daily, Rodong Sinmun, reported on August 11 that “a commemorative briefing session was held on 10th August on the 70th anniversary of the foundation of the Pyongyang Essential Foodstuff Factory. . . . Loyally following the will of the Party, the factory has strengthened and developed itself into a comprehensive and modern essential foods production facility with massive productive potential and a robust physical-technical basis.”

In commemoration of the anniversary, the Central Committee of the WKP sent a congratulatory message, while Pyongyang City Party Secretary Kim Su Gil, head of the factory Ri Gun Il, chief engineer Son Hyon Chol, and shop floor head Rim Jin Myong were in attendance.

The future trajectory of the factory was set out in the aforementioned nationalization law: “it has been observed that under Japanese imperialism, the Korean economy was subjugated, and factories, power plants, railways, etc. were constructed with the blood and sweat of the Korean people. All of these facilities must become the property of the Korean people.”

In accordance with this, all property of Japanese companies and individuals, and national traitors, including factories, mines, power plants, railways, communications, banks, retail enterprises, and cultural institutions, were confiscated and nationalized.

The Pyongyang Essential Foodstuff Factory was originally the ‘National Foods and Soy Sauce Corporation’, formed by a Japanese Zaibatsu in September 1933. Following its nationalization in 1946, it became known as the Korean Soy Sauce Factory in 1947, and became the Korean Pyongyang Soy Sauce Factory in 1955 as it became affiliated with the Ministry of Light Industry. In 1960, its name changed to the Pyongyang Soy Sauce Factory, then the Pyongyang Sauce Factory in 1963, and in 1973, it was again changed to the Pyongyang Chemical Seasoning Factory. It acquired its current name in the year 2000. [NKeconWatch: It is now known as “Pyongyang Condiments Factory”]

Located in the Songyo District of Pyongyang, it began in late 1945 by producing soy sauce and soy bean paste. In January 1961, on the orders of Kim Il Sung, it merged with Songsin Oil Factory. It was further remodeled in 1967, and began to produce synthetic seasoning. In April 1982, at around the 27th anniversary of Chongryon, a patriotic fermentation soy sauce works was constructed.

In the Kim Jong Il era, the factory became equipped with a disinfecting, unmanned oil refining process, and an essential nutrients production facility. When Kim Jong Un gave on-the-spot guidance in June 2013, he judged “the factory to be a rare court of workers, a delicious place for the Worker’s Party generation, overflowing with patriotism.”

Remodeled in 2013, it takes up a total area of 102,000 square meters, with a floor space of 63,900 square meters. It produces a range of products including soy bean paste, soy sauce, cooking oil, seasonings, salt and vitamin E-related products.

As a recipient of the title of a 2nd Grade Twenty-sixth Exemplary Unit Movement Factory, it was described as having “been as loyal to Party and Leader as white jade, and accomplishing the dying wishes of the General [Kim Jong Il] in an exemplary fashion. It has actively contributed to the development of the country’s food industry and improvement of the people’s diet with revolutionary struggle and clear industrial success.”

Share

China shuts down part of Dandong-Sinuiju bridge [UPDATE: Delayed]

August 17th, 2016

UPDATE 1 (2016-8-23): Whether true or not, the Daily NK now reports that the bridge closing has been delayed. According to the article:

Necessary repair work on the North Korean side of the bridge connecting the country with China over the Amrok (Yalu) River has been delayed following a last-minute plea by the North Korean authorities, Daily NK has learned.

A source in North Pyongan Province close to the issue told Daily NK on August 22 that Pyongyang cited pressing foreign-currency shortages in its request to the Chinese authorities to put off the month-long maintenance period, scheduled to commence on August 20.

“The Chinese Railway Ministry warned of ‘imminent and severe accidents’ if the bridge [on the North Korean side] remains in its current state of disrepair, ” the source said, “but the North Korean side refused to give in [and begin the repairs] and so customs is still operating normally.”

It is not yet known when the repair work will get underway. “Trading companies were told to operate normally, and affiliated vehicles are increasingly ignoring imposed freight loads limits in a bid to transport the greatest volume of goods possible, the source said.

According to a source close to the issue in China, notwithstanding the maintenance delay, China will continue to exert pressure on North Korea to carry out the repairs on its end. As such, trading companies are overloading vehicles with goods to hedge against the economic losses expected during the repair period.

“Trading companies interpret the ambiguous start date for repairs as an ominous sign. They know that the ax could drop at any time, and that obviously makes it difficult to plan. This notion has ushered in a flurry of trade activity, which in turn evokes a very different environment to the restrictive one palpable following the sanctions implementation,” the North Pyongan-based source concluded.

ORIGINAL POST (2016-8-17): by Benjamin Katzeff Silberstein

A small reminder that border traffic flows can be impacted by other factors than sanctions and policies:

On the heels of a fleeting reopening, China has suspended road traffic and customs operations on the Sino-North Korean Friendship Bridge until critical risks are mitigated on the North Korean side. The move will greatly challenge North Korea’s foreign-currency operations, which lean heavily on Sino-North Korean trade, 70 percent of which flows through the connecting overpass.

“China ordered the repairs after discovering additional risk factors on the North’s side despite the construction work carried out from July to earlier this month,” a source from North Pyongan Province said, adding that construction will begin August 20.
“China’s railway officials detected these dangers, and, in no uncertain terms, demanded the cessation of vehicular transport and the commencement of large-scale restorations.”
This news was corroborated by additional sources in North Pyongan Province.
Saddled with rigid foreign-currency quotas, this is most distressing for North Korean trading companies, she added. And with the prohibitive costs involved in sea transport, these entities are left with little in the way of viable transport alternatives; the railway connection adjacent to the road will remain operational for the duration of the repairs but only for small loads.
The looming trouble Pyongyang faces is, in many respects, self-inflicted– the culmination of securing leadership funds at the expense of vital safety regulations. The recent decision to haphazardly patch over problem areas, rather than administering thorough repairs, despite compelling precedent, being a case in point.
When a truck overturned last year, weight limitations were introduced but remain rarely enforced, particularly for mineral-laden trucks, the most frequently overloaded vehicles.
“Overloading is of little concern the North Korean leadership,” the source asserted. “Their focus is solely on securing enough money, and because they don’t bat an eye about violating customs regulations, trade companies load on as much as they can.”
By unilaterally calling for a traffic block on the bridge, China may be hoping to wrangle North Korea into finally upholding its end of a mutually-beneficial deal sitting just downstream. China invested 340 mil. USD for the new bridge, completed in 2014, but North Korea has yet to build the necessary connecting infrastructure on its side.
Full article:
China shuts down road traffic on Sino-NK bridge
Seol Song Ah
Daily NK
2016-08-17
Share

DPRK – China Trade in 2016 (UPDATED)

August 15th, 2016

UPDATE 13 (2016-8-25): According to the Korea Herald, China’s exports to North Korea showed the largest on-year drop in July:

According to KITA, China’s exports to North Korea came to US$193 million in July, plunging 27.6 percent from the same month last year. Last month’s decrease is the biggest drop in China’s exports to North Korea this year.

Along with exports, China’s imports from North Korea also dropped by 5 percent from a year ago to come in at US$227 million, the data showed.

KITA attributed the changes to China’s sanctions against Pyongyang, and to North Korea’s dwindling foreign reserves.

China has been limiting trade with North Korea since April.

UPDATE 12 (2016-8-24):  According to Yonhap, China’s imports from DPRK fell in q1 2016 (before US/UN sanctions passed/implemented) compared with previous year:

China’s northeastern province of Jilin saw its imports from North Korea plunge nearly 15 percent in the first quarter of 2016 from a year ago, data showed Wednesday, dealing a fatal blow to the neighboring country’s moribund economy.

According to the Chinese customs data, Jilin’s trade with North Korea sank 14.7 percent on-year to US$176 million in the January-March mainly because of plunging imports.

Jilin, which borders the North’s three provinces, is China’s hub of trade with its ally and boasts the largest trade volume with Pyongyang among China’s provinces.

Jilin’s imports from North Korea came to $66 million in the three-month period, down 33.8 percent from a year earlier. Tumbling imports of such major items as iron ore, clothing and fisheries goods led the drop.

Imports of North Korean iron ore dipped 19.3 percent on-year to $7.28 million in the first quarter, with those of clams, T-shirts and functional clothing nose-diving 25 percent to 73 percent.

China experts said Jilin’s imports of iron ore from North Korea fell sharply in the first quarter due to sluggish demand from China in the wake of Beijing’s move to eliminate its steel overcapacity.

U.N.-led international sanctions on North Korea for its nuclear and missile programs seemed to play a part as well. Pyongyang conducted its fourth nuclear test in January and has test-fired a series of ballistic missiles in recent months.

The Chinese province’s imports from North Korea are estimated to have dropped further in the second quarter when the sanctions began to bite, they added.

“A tumble in trade with Jilin comes as a serious blow to North Korea as it relies heavily on exports of minerals to the province for external trade,” a North Korea watcher said.

Meanwhile, North Korea’s overall trade with the world’s largest economy dropped 9.3 percent on-year to $2.31 billion in the first half of this year, with exports and imports falling 3.1 percent and 16 percent each.

UPDATE 11 (2016-8-19): NK News reports on the DPRK – China coal trade:

But in April, Chinese imports of the high-quality smokeless coal anthracite from North Korea plummeted, according to data from the Korea International Trade Association (KITA) in Seoul which sources Chinese import receipts. Shipments of 1.525 million tons were down 35 percent – albeit compared to record highs in March – and 21 percent compared to the same month last year/compared to April last year.

Then, after just one month, Beijing’s toughness on Kim Jong Un appeared to dissipate. Since April, Chinese imports of North Korean coal – worth 40 percent of total export earnings – have begun to return to normal levels.

In May, imports of anthracite were up 1.7 percent on the low of the previous month but still down 15 percent on May 2015, KITA data showed.

This recovery continued into June. China’s imports of anthracite rebounded nearly 22 percent, coming out of the trough of April and May, and were down just 5.6 percent on May 2015.

While China is trying to cap and reduce coal use – consumption fell for the second year in a row in 2015 – its demand for anthracite to produce metals remains high.

China’s total coal imports slumped 30 percent last year as the government emphasized other cleaner energy sources. This, in turn, pushed down the domestic price of coal, also by 30 percent, and as a result, imports were less competitive and shipments to China dropped.

But while Chinese coal imports from key suppliers Australia and Indonesia plummeted last year, there was one source country that recorded a 25-percent surge in shipments: North Korea.

“This type of coal is in shortage and, in fact, North Korea is the largest supplier of this type of coal to China,” she said.

This complex picture has produced confusing and often contradictory reports on China’s sanctions enforcement previously, and especially since Resolution 2270 passed in March. What has become clear, say observers, is that North Korean coal is increasingly reaching China which has, at the same time, turned down negative rhetoric against North Korea. Meanwhile, China remains keen to create the impression it is enforcing UN sanctions as part of its international commitments.

UPDATE 10 (2016-8-14): Yonhap reports that N. Korea-China trade showing signs of revival:

Lim Eul-chul, research professor at Kyungnam University’s Graduate School of North Korean Studies said that his contacts in China have hinted that while Chinese customs offices ostensibly claim they are adhering to the United Nations Security Council (UNSC) resolution restricting transactions with Pyongyang, there has been a noticeable easing in oversight by authorities.

“Chinese companies who had held back on trading with the North, have started to ship more goods after hearing the news that Seoul-Beijing relations have taken a turn for the worse over the THAAD issue,” the scholar said.

He also said that there have been reports of greater traffic moving between the country at night and early morning hours. Lim said that taking into account the customs office operating hours, the flow of traffic at such hours could indicate the illegal movement of goods.

This view was echoed by Cho Bong-hyun, an analyst at the IBK Economic Research Institute, who said that people living in the Sino-North Korean border region are saying customs inspections have become lax along the Sino-North Korean border.

“There is even speculation that banned items are being disguised as products that are not subject to the UNSC sanctions and are being traded,” he said.

Reflecting this, two-way trade data between the neighboring countries support this.

Official customs data released by China showed bilateral trade hitting US$503.77 million in June, up 9.4 percent on-year, and the first rebound just three months after Beijing said it will clamp down on trade. The increase is significant because it took place before the THAAD deployment was announced.

According to U.S.-based Radio Free Asia (RFA), people in Liaoning Province said that the number of cargo trucks coming out of North Korea on a daily basis has jumped twofold to 20 from just 10 two months earlier.

“While trucks only arrived twice a week from North Korea to China just a few weeks ago, they are currently arriving every day, which may be neutralizing the international sanctions,” the media outlet citing a source said. The local said that the traffic involved container trucks.

UPDATE 9 (2016-8-14): Japanese media reports that oil exports to the DPRK have increased:

Japan’s Yomiuri Shimbun daily says that China’s oil supply to North Korea appears to have increased.

The daily said on Sunday that freight trains traveling from the oil storage facility in Dandong to the Daqing oil field operated once a day when the United Nations sanctions against the North were imposed, but the number increased to two to three times a day from late June.

The paper speculated that the change reflects China’s concerns that the Kim Jong-un regime might become unstable under continued international sanctions following the North’s missile launches and nuclear tests.

UPDATE 8 (2016-8-12): The information should be taken with a grain of salt, but according to the Daily NK:

Thousands of tons of iron ore exports from the North are pouring into China daily, despite UN Security Council sanctions issued in April that ban states from procuring minerals from the regime unless related to “livelihood purposes”, Daily NK has learned.

“The Chinese regions facing Musan County in North Korea are teeming with thirty- and forty-ton trucks loaded with iron ore,” a source in China with knowledge of North Korean affairs told Daily NK in a telephone conversation on August 11.

Sources in North Hamgyong Province corroborated this news.

The trucks, he added, are mostly transporting iron ore to a classification yard near Helong City in China. In the past, the railways near Helong running along the Tumen River border area were not frequently utilized. But recently China added express freight trains on this route, presumably to facilitate more expedient transport of North Korean iron ore to local steel mills. More broadly, the source asserted the development indicates Beijing’s future intentions to expand trade with the North.

Connecting dozens of 100-ton freight cars, the express trains transport some 2,000 tons in a single shipment, with several round trips transpiring daily. Moreover, the source noted, “Some cargo trucks transport goods from Musan Mine across the submerged bridge on Tumen River directly to steel mills in China.”

The partially underwater bridge, made by connecting slabs of rock large enough to permit vehicular transport, was constructed in the early 2000s to facilitate the Sino-North Korean iron ore trade industry. However, following the implementation of strong global sanctions earlier in the year, iron exports plummeted, rendering the bridge obsolete.

More recently, however, this crude piece of infrastructure is experiencing a resurgence, coming as quite a surprise to local Chinese residents. The source explained that goods passing through Chilsong Customs are checked thoroughly, item by item. Customs officers at the underwater bridge, on the other hand, merely record the total number of shipments passing through, making it the preferred conduit for proscribed goods.

The general rise in trade can also be noted in Dandong, the gateway to 70 percent of trade between the North and China. A source in the city told Daily NK earlier in the month that after the reopening of the aging Sino-North Korean Friendship Bridge, after yet another round of repairs, the volume of shipments has been on a steady uptick.

“Roughly 1,000 trucks, each with a 20-ton loading capacity, are laden with diverse goods and pulling into Sinuiju daily. That’s more than a ten-fold increase,” she said.

The number of trucks coming out of the North to Dandong has also climbed, energizing trade and overall activity in the border area–so much so, in fact, that some residents have asked whether sanctions on the North have been lifted. Others speculate the reversal is a form of retaliation from Beijing against Seoul for deciding to deploy the U.S. missile defense system THAAD to the South.

UPDATE 7 (2016-8-2): N. Korea’s exports of unsanctioned resources to China jump in first half of 2016. According to Yonhap:

North Korea’s shipments of natural resources to China that are not on the United Nations’ sanctions list sharply increased in the first half of the year, nearly making up for a decline in shipments of products prohibited by the U.N., a report showed Saturday.

Shipments of five mineral resources from North Korea to China came to US$78.2 million in the first six months of the year, up 50.3 percent from the same period last year, according to the report from the North Korea Sources Institute in Seoul.

The five minerals are lead ores, zinc ores, spelter, magnesia and cooper ores, which are not on the U.N. list of goods prohibited from access to or from the communist state.

The sanctions, under the U.N. Security Council Resolution 2270, were issued in response to North Korea’s defiant nuclear test in January and a long-range missile launch the following month.

In the January-June period, China’s imports of seven mineral resources from the North that are prohibited under the U.N. resolution plunged 15.7 percent on-year to $547.2 million. Such a drop accelerated in the second quarter, plunging 25.6 percent on-year as the U.N. sanctions were put in place in March.

The prohibited items include coal and iron ores.

An institute official, however, noted the drop in China’s imports of North Korean minerals may have come from a dip in China’s own demand for the said natural resources, adding the cut in imports may not necessarily indicate that China is faithfully implementing U.N. sanctions.

China is the North’s largest communist ally.

Meanwhile, the think tank estimated North Korea’s total coal production for 2015 at 33.8 million tons, up 12.2 percent from a year earlier. It put the estimate of the country’s iron ore production at 4.26 million ton for 2015, down 25 percent year-on-year.

UPDATE 6 (2016-7-25): Leo Byrn wrotes about DPRK-China trade in NK News:

Volumes of anthracite shipped to China in June increased from 1.5 million tonnes to 1.8 million. The number is higher than both January and February export totals and consistent with a recent trend which saw North Korea export more coal to its neighbor in order to combat low commodity prices.

Chinese traders paid their North Korean counterparts over $88 million for the coal in June, a $14 million increase over the previous month. While the figures are down compared to their March equivalents, those were record exports for the DPRK at 2.3 million tonnes.

Shipments of North Korean iron ore showed an even more pronounced rise after the UN passed Resolution 2270. While volumes are smaller, North Korean iron ore exports increased more than 100 percent between April and May.

June’s exports also increased, but at a slower rate to over 221,000 tonnes. The number is more than double the March export figure, and continues a theme of month on month increases beginning in April.

Exactly how Beijing has set about enforcing the new sanctions is currently unclear. Resolution 2270 contains an exception allowing iron and coal imports provided the revenues do not contribute to the North’s weapons programmes.

But how the process works is currently vaguely defined, and it is unknown how authorities would ensure cash flows from commodity exports go where intended.

The increasing exports could also be the result of traders playing out existing contracts, or arise from the difficulties in rapidly shutting down large scale trade.

UPDATE 5 (2016-06-22): China’s imports of North Korean goods fell 12.59 percent on-year in May

By Benjamin Katzeff Silberstein

Says Yonhap, citing KOTRA data:

China’s imports of North Korean goods fell 12.59 percent on-year in May, data showed Wednesday, amid tougher U.N. sanctions against Pyongyang’s nuclear weapons and missile programs.

Imports from North Korea declined to US$175.6 million last month, compared to $200.9 million for the same month last year, according to Chinese customs data compiled by the Beijing unit of South Korea’s Korea Trade and Investment Promotion Agency (KOTRA).

Imports of North Korean coal, which accounts for nearly half of the North’s annual exports to China, plunged 28.3 percent on-year to $74.7 million in May, the data showed.

China’s exports to North Korea also fell 5.9 percent on-year to $239.3 million last month, according to the data.

However, these numbers suffer from the same problems that often plague trade data on North Korea. We don’t know 1) how much of the decrease is caused by a general, global drop in world market prices for North Korea’s export goods, and how much is an actual, quantitative import decrease, and 2) how much of the drop would have counterfactually happened “anyway,” given the contraction of Chinese industries using North Korean coal.

Full article:
China’s imports of N. Korean goods fall 12.6 pct in May 
Kim Deok-hyun
Yonhap News
2016-06-22

UPDATE 4 (2016-6-3):  The Institute for Far Eastern Studies (IFES) also comments on the April 2016 trade statistics.

China Decreased Imports from North Korea in April by 22.3 Percent

Last month, imports from North Korea to China plunged more than 20 percent below that of the same period last year. April is the first month for China to begin the implementation of sanctions against North Korea adopted by the UN Security Council resolution. China’s sanctions against North Korea have a notable effect.

KOTRA Trade Office in Beijing released the official DPRK-China trade statistics of Chinese Maritime Customs Service on May 14. According to this report, China’s total import volume from North Korea in this period recorded 161,380,000 USD, down 22.35 percent compared to April last year. By item, imports of coal decreased by 38.34 percent while lead imports were reduced by 16.12 percent. There were no titanium imports as China listed titanium as one of the banned exports from North Korea.

However, iron ore is one of North Korea’s main export items along with coal. Unlike lead and coal, the import of iron ore increased 19.38 percent, and zinc import jumped a whopping 685 percent. In this regard, China appears to have decreased coal imports to deal with domestic overproduction problem of coal while increasing the imports of other minerals and under the suspicion that it is imposing sanctions on North Korea only on the outside.

China’s exports to North Korea recorded insignificant decrease of approximately 1.53 percent, with a total volume of 268,000,000 USD. Refined oil including jet fuel was identified to have decreased 6.11 percent compared to the same period last year. Exports of freight cars and electronic equipment decreased 45.46 percent and 43.95 percent, respectively, while agricultural and clothing items were not much affected.

As a result, the total of DPRK-China trade volume decreased 10.54 percent compared to last year, at 429,410,000 USD. Last month on April 5, China’s Ministry of Commerce announced 25 banned items of import and export to and from North Korea. This is about a month since the resolution on North Korean sanctions was passed. Since then, China immediately began to impose sanctions.

In the list of import bans, there are a total of 20 items, including coal, steel, and iron ore, along with gold, titanium, vanadium ore and other rare earth minerals as classified by maritime customs. Prior to the sanctions, DPRK-China trade in March recorded 490,000,000 USD in trade volume, which was an increase of approximately 20 percent compared to the previous year.

As China continues to impose sanctions on North Korea, North Korea can be expected to suffer a significant setback in its foreign currency earnings.

UPDATE 3 (2016-5-25): DPRK – China trade Jan 1 – April 30 2016:

Preliminary estimates of trade volume between DPRK and China through April 30 total appx $1.597 billion ($4.791 annualized, 11.7% decrease from 2015).

DPRK imports/Chinese exports total $862 million, and DPRK exports/Chinese imports total $735 million. So we can see a bilateral trade deficit in Jan-April 2016 of appx $127 million ($381 million at annualized rate vs $460 million in 2015).

Chinese enforcement of UNSC Resolution 2270 reportedly began in April, in which China reports it’s DPRK imports total US $161 million (down 22.3% from April 2015). Coal imports at $72.2 million (down 38.2% from April 2015 total of $116.6 million), gold imports $250k (down 91.1% from April 2015). China’s exports total $268 million in April 2016 (down 1.5% from April 2015).

It is impossible to tell from this data whether the sanctions are having any impact beyond the general downturn in the Chinese economy because this is trade based on value (Price x Quantity), and prices of North Korea’s commodity exports have been falling as well. We need to compare the quantity of the prohibited mineral exports over time to see if the sanctions are having any impact (assuming China is accurately reporting them).

It is also important to remember that DPRK – China trade is not regular, so past performance is not necessarily indicative of future results. Also, the data can be revised for numerous reasons.

Finally, China stopped reporting unrefined oil exports to the DPRK in 2014, but they did not stop exporting unrefined oil itself. According to Chinese customs data, the country exported about 520,000 tons of oil to North Korea every year from 2009 to 2012. Beijing normally supplied between 30,000 to 50,000 tonnes (222,000 to 370,000 barrels) of crude oil to North Korea every month. Shipments of crude oil to North Korea rose 11.2% to 578,000 tons in 2013.

The data in the above summary comes from the articles below, starting with this in the Choson Ilbo:

China’s imports of North Korean products declined more than 20 percent last month compared to the same period of 2015 as Beijing began to implement UN Security Council sanctions against Pyongyang.

According to statistics by the Korea International Trade Association, China imported US$161 million worth of North Korean products in April, down 22.3 percent on-year.

Its imports of North Korean coal fell 38.2 percent to $7.21 million [this statistic is wrong and was corrected by Yonhap], and of gold 91.1 percent to $250,000. Imports of North Korean titanium, which is on the list of banned imports, were zero.

But imports of iron ore, which is allowed since it is thought to support the livelihood of ordinary North Koreans, increased 1.7 percent, and of zinc, which is also not banned, a whopping 685 percent to $5.7 million.

China’s exports to North Korea totaled $268 million last month, down 1.5 percent. Sales of jet and rocket fuel dropped 39.9 percent and of cars and electronic equipment 45.5 percent and 43.9 percent.

Total trade between North Korea and China last month fell 10.5 percent on-year to $429 million. If China continues to abide by UN Security Council sanctions against North Korea, bilateral trade will shrink further and dent the North’s attempts to earn hard currency.

North Korea’s state-run Rodong Sinmun daily on Tuesday complained that the sanctions are pressuring the North “beyond imagination.”

Read the full story here:
Sanctions Slash Chinese Imports of N.Korean Products
Choson Ilbo
2016-5-25

UPDATE 2 (2016-5-23): Reuters reports a drop in Chinese imports of North Korean coal:

China’s imports of coal from its neighbor North Korea reached 1.53 million tonnes in April, down 35 percent on the month and 20.5 percent year-on-year as Beijing sought to comply with a tougher sanctions regime against the country.

North Korean shipments over the first four months of the year remain 23.2 percent higher than the same period of 2015, data from China’s General Administration of Customs showed on Monday.

China’s Ministry of Commerce announced at the beginning of April that it would ban North Korean coal imports to comply with new United Nations sanctions on the country, though it made exceptions for deliveries intended for “the people’s wellbeing” as well as coal originating from third countries like Mongolia.

Mongolia was the chief beneficiary of the decline in shipments from North Korea, with the country supplying 1.98 million tonnes to China in April, up 34.7 percent on the year.

Australia remained China’s biggest supplier, though the April volume of 5.74 million tonnes was down 12.9 percent compared to last year.

Read the full story here:
China coal imports from North Korea dip 35 percent as sanctions bite
Reuters
2016-5-23

UPDATE 1 (2016-4-14): Yonhap reports on Q1 2016. Overall trade is up, but this is composed of surging Chinese exports to North Korea and falling imports. Here are the relevant parts of the report:

Trade volume between North Korea and China posted double-digit growth in the first quarter of 2016 from a year earlier despite the United Nations’ punitive economic sanctions imposed on the reclusive country, official data showed Wednesday.

The size of bilateral trade stood at 7.79 billion yuan (US$1.2 billion) in the January-March period, up 12.7 percent from the same period last year, Huang Songping, spokesman of China’s General Administration of Customs, said during a press briefing on the country’s first-quarter trade outcome.

The increased trade volume is attributable to a sharp rise in China’s exports to North Korea in the three months, which posted 14.7 percent growth to 3.96 billion yuan, according to the spokesman.

On the other hand, China’s imports from North Korea contracted 10.8 percent to 3.83 billion yuan, he said.

“Major Chinese exports to North Korea are machinery, electronic goods, labor-intensive products and agricultural goods, while imports mainly are coal and iron ore,” Huang said.

The spokesman indicated that the trade increase should not be viewed as China circumventing the U.N. Security Council sanctions because the latest figure accounts for bilateral trade volume before the sanctions took effect.

China immediately implemented the sanctions after it announced a list of banned trade goods with North Korea on April 5, the spokesman pointed out.

“The China-North Korea trade data for the first quarter has nothing to do with anti-North sanctions,” the official said, also vowing to “follow through with the U.N. sanctions resolution thoroughly.”

Another official from China’s State Council stressed any trade items that concern the public welfare or have no link to North Korea’s nuclear weapons development are not subject to the sanctions.

But the official refused to release the monthly trade figure for March, only saying that the monthly data is not available.

In early March, the U.N. adopted the toughest sanctions it has ever slapped on North Korea as punishment for the communist country’s defiant nuclear test in January and a long-range rocket launch in February.

Read the full story here:
N. Korea-China trade volume up 12.7 percent on-year in Q1
Yonhap
2016-4-13

ORIGINAL POST (2016-4-7): The Chinese Ministry of Commerce issues announcement on trade and UNSC Resolution 2270:

MOFCOM Announcement No. 11 of 2016 Announcement on List of Mineral Products Embargo against the DPRK
April 7, 2016 – 10:57 BJT (14:57 GMT) MOFCOM

In order to carry out relevant resolutions of the UN Security Council and in accordance with the Foreign Trade Law of the People’s Republic of China, the following products are hereby embargoed against the Democratic People’s Republic of Korea:

1. Imports of coal, iron and iron ores from the DPRK are forbidden with the following two exceptions:

(1) Trading that is determined to be conducted to generate profits solely for the people’s livelihood, and that does not involve the nuclear program or the ballistic missile program of the DPRK or any other profit generating activities prohibited in the Resolutions No. 1718(2006), No. 1874(2009), No. 2087(2013), No. 2094 (2013) or No. 2270 (2016) of the UN Security Council.

If the import falls into the range of the trade mentioned above, then during the import declaration, the enterprise shall submit to the customs authority a letter of commitment (See Annex 2) signed by its legal representative or principal and affixed with its official seal. If it is confirmed by solid information that the imports are not for the people’s livelihood, or are related to the nuclear program or the ballistic missile program of the DPRK, the customs authority will not clear such imports.

(2)Trading of coal that is confirmed not to be originated in the DPRK but is delivered and used to export from the Port of Rason through the DPRK, and such trade does not involve the nuclear program or the ballistic missile program of the DPRK or any other profit generating activities prohibited in the Resolutions No. 1718(2006), No. 1874(2009), No. 2087(2013), No. 2094 (2013) or No. 2270 (2016) of the UN Security Council.

If the import falls into the range of the trade mentioned above, the importing enterprise shall submit to the provincial competent commerce authority, where such enterprise is located, relevant information and application in advance, which shall then be submitted to the Ministry of Foreign Affairs via the Ministry of Commerce, and then notified to the Sanctions Committee of the UN Security Council for record-filing before the enterprise can begin to import. During the import declaration, the enterprise shall submit to the customs authority a letter of commitment (see Annex 3) signed by its legal representative or principal of the enterprise and affixed with its official seal and the certificate of original. If it is confirmed by solid information that the trade does not fall into the exception, then the customs authority will not clear the imports.

2. Imports of gold ores, titanium ores, vanadium ore, and rare earth minerals from the DPRK are forbidden.

3. Exports of aircraft fuel including aviation gasoline, naphtha aircraft fuel, kerosene aircraft fuel and kerosene rocket fuel are forbidden with the following two exceptions:

(1) The aircraft fuel that has been specially approved by the Sanctions Committee of the UN Security Council case by case to be transferred to the DPRK and verified to be used to satisfy basic human needs; however, special arrangements must be made to effectively monitor the delivery and use of such fuel.

(2) The aircraft fuel that is sold to civil airplanes outside the territory of the DPRK or is supplied solely for use in trips from and to the DPRK.
4. For details of the product embargo, please see Annex 1.

This Announcement shall be implemented as of the date of announcement.

Share

North Korean iron ore continues flowing into China, reports suggest

August 12th, 2016

By Benjamin Katzeff Silberstein

Despite firm promises from Chinese officials of full sanctions enforcements, reports from Daily NK suggest that iron ore is still being exported in substantial quantities from North Korea. Sanctions allow imports of iron ore when proceeds benefit “livelihood purposes,” but this seems to be a very difficult criteria to ensure in practice:

Thousands of tons of iron ore exports from the North are pouring into China daily, despite UN Security Council sanctions issued in April that ban states from procuring minerals from the regime unless related to “livelihood purposes”, Daily NK has learned.
“The Chinese regions facing Musan County in North Korea are teeming with thirty- and forty-ton trucks loaded with iron ore,” a source in China with knowledge of North Korean affairs told Daily NK in a telephone conversation on August 11.
Sources in North Hamgyong Province corroborated this news.
The trucks, he added, are mostly transporting iron ore to a classification yard near Helong City in China. In the past, the railways near Helong running along the Tumen River border area were not frequently utilized. But recently China added express freight trains on this route, presumably to facilitate more expedient transport of North Korean iron ore to local steel mills. More broadly, the source asserted the development indicates Beijing’s future intentions to expand trade with the North.
Connecting dozens of 100-ton freight cars, the express trains transport some 2,000 tons in a single shipment, with several round trips transpiring daily. Moreover, the source noted, “Some cargo trucks transport goods from Musan Mine across the submerged bridge on Tumen River directly to steel mills in China.”
The partially underwater bridge, made by connecting slabs of rock large enough to permit vehicular transport, was constructed in the early 2000s to facilitate the Sino-North Korean iron ore trade industry. However, following the implementation of strong global sanctions earlier in the year, iron exports plummeted, rendering the bridge obsolete.
More recently, however, this crude piece of infrastructure is experiencing a resurgence, coming as quite a surprise to local Chinese residents. The source explained that goods passing through Chilsong Customs are checked thoroughly, item by item. Customs officers at the underwater bridge, on the other hand, merely record the total number of shipments passing through, making it the preferred conduit for proscribed goods.
The general rise in trade can also be noted in Dandong, the gateway to 70 percent of trade between the North and China. A source in the city told Daily NK earlier in the month that after the reopening of the aging Sino-North Korean Friendship Bridge, after yet another round of repairs, the volume of shipments has been on a steady uptick.
“Roughly 1,000 trucks, each with a 20-ton loading capacity, are laden with diverse goods and pulling into Sinuiju daily. That’s more than a ten-fold increase,” she said.
Full article:
North Korean iron ore exports to China booming despite sanctions
Daily NK
Choi Song Min
2016-08-12
Share

North Korea’s smallest market?

August 11th, 2016

Sometime between 2015-5-25 and 2016-6-27 a new candidate for what may be North Korea’s smallest formal market (시장) was built in remote Komsan-ri, Hyesan City, on the Chinese border.

Komsan-ri-Market-2016-6-27

The Market is approximately 17m x 12m and consists of a central table and possible vending space around the perimeter.

There may be a smaller formal market somewhere in the DPRK, but I can’t think of one at the moment.

Here are some other recent changes that have taken place in Hyesan (new customs office, orphanages, renovated railway line progress (to Samjiyon) and some renovated train stations.

Share

North Korea training experts in special economic zones and development

August 10th, 2016

Institute for Far Eastern Studies (IFES)

North Korean universities have begun programs to train specialists in matters related to special economic zones (SEZs) and their development.

On August 1, 2016, the North Korean website Naenara (lit: ‘My Country’) revealed this, saying “One of the most important matters with respect to development of Special Economic Zones (SEZs) is the training of a large number of specialists. Hence, the government of the republic [DPRK] has established and implemented an educational program that aims to train specialists in this field.”

According to the website, the training of specialists in the development of SEZs has begun at Kim Il Sung University, the University of the People’s Economy, and Jong Jun Taek University of Economics (also known as Wonsan University of Economics).

These universities have departments specializing in the management of SEZs, real estate, tourism, and international investment. The curricula are based upon the developmental experiences of Rason Economic Investment Zone, the Hwanggumpyong-Wihwado Economic Zones, along with the law, regulations, and the experience of other countries.

These departments train specialists on the economic principles and effects of special economic development zones, theories on the form zones take and how development occurs, as well as how developmental strategy is devised. They also deal with issues like the creation of comprehensive development plans, the designation of companies for participation in development projects, the conclusion of development-related contracts, the conferring of development rights, the conclusion of land-usage contracts, the sale of land usage rights and the operation of sub-structural operations, and management of investment by foreign companies.

Naenara’s post also indicated that “the government of the republic has organized the investigation of the success of other countries in the development of special economic zones, this is being undertaken by university staff and researchers. A number of the country’s universities, research institutions, persons of repute, and public forums are engaged in these tasks.”

It also underscored the aim of “in future, scientific research dealing with special economic zones (SEZs) should be deepened, and education programs strengthened. Moreover, multifaceted cooperation and exchanges should be expanded with all countries that respect the sovereignty of the country [DPRK].”

The North Korean magazine ‘Mount Kumgang’ — which targets a foreign audience — for the last two months has also printed a series entitled ‘Regarding plans to expand foreign investment relations’. The series publicizes the variety of government policies designed to attract investment.

In one of these pieces, Cho Chang Jun (a professor of the University of the People’s Economy) explains that “with the importance of our government’s efforts to expand and develop foreign investment relations lies a number of legal measures, implemented in a way that is stronger than ever before, and which give foreign investors in our country a guarantee, in the government’s name, for a return of the principal invested and the payment of profits.”

The Rason SEZ (Rason Economic and Trade Zone) was created in the 1990s. In 2013, SEZs were also announced in each of the country’s provinces. At present there are 26 SEZs in North Korea.

Share

North Korean defector numbers up by 15 percent from last year

August 5th, 2016

By Benjamin Katzeff Silberstein

After diminishing to relatively low numbers following Kim Jong-un’s ascension to power and tighter controls preventing people from leaving the country, the number of defectors reaching South Korea was 15 percent higher between January and July this year as compared to 2015, Chosun Ilbo reports:

From January thorough July this year some 815 North Koreans fled their country and arrived in the South, up around 15 percent from the same period last year, the Unification Ministry said Tuesday.
This suggests that international sanctions and the resulting economic straits in the repressive North are driving many away. More defectors now come from the elite, which for long thrived while ordinary North Koreans starved.
From 2006 to 2011, some 2,000-plus people fled the North every year, but when Kim took power in 2012 numbers dropped to about 1,500.
Last year the number was down to 1,276. The regime boosted border patrols, forcibly relocated the families of defectors, and meted out tougher punishment for those who aided and abetted defections.

To me, the claim that people are leaving in higher numbers because of sanctions sounds very unlikely, to say the least. Even if sanctions are hitting the economy in a way that most people feel (which is itself doubtful at this time), it is difficult to see that it would be enough to tip the scale toward 15 percent more people defecting. One could argue that the speed battles of the past year may well have done much more to lower the quality of life for most North Koreans than sanctions have, but of course, it is impossible to pinpoint a specific reason for this increase.

Full article:
N.Korean Defections on the Rise Again
Chosun Ilbo
Lee Yong-soo
2016-08-03

Share

Mobilizing “All energy in securing underground resources” to implement development strategy

August 1st, 2016

Institute for Far Eastern Studies (IFES)

Kim Jong Un has appealed for all energy to be put into developing underground resources in order to implement the ‘Five Year State Economic Development Strategy’ (unveiled at the 7th Party Congress of the Workers Party of Korea held in May).

In reporting that appeared in Rodong Sinmun on July 13, 2016 it was asserted that “The task of developing and using underground mineral resources effectively to raise self-sufficiency and independence lies in front of party members and workers who are vigorously participating in a 200 day speed battle to make a breakthrough in the implementation of the Five Year State Economic Development Strategy in the country, which is known worldwide for its minerals.”

It went on to urge that “with the close collaboration between the state resources development sector and scientific research groups, all resources must be concentrated on prospective and current surveys (surveys that measure mineral reserves) to ensure that the Five Year State Economic Development Strategy succeeds.”

It added, “energy must be put in to find more as yet undeveloped potential sites for development . . . reserves must be secured to ensure that mine production continually rises.”

It also emphasized that “all illegal extraction of underground mineral resources by [production] units, factories and collective organizations for the benefit of their own unit alone must be gotten rid of . . . [and] the role of institutions supervising and controlling underground resources and environmental protection must be strengthened.”

Admittedly, the paper also demanded natural tourist attractions be protected: “the staff of supervisory institutions must engrave deeply in their hearts the earnest wish of the Great Leader by not developing Mount Kumgang and Mount Myohyang, regardless of how large the underground mineral deposits are there, and hand down their beautiful scenery and nature to posterity.”

At the aforementioned 7th Party Congress, Kim Jong Un unveiled the ‘Five Year State Economic Development Strategy’, and also set out to revolve energy problems and strengthen the self-sufficiency and independence of the people’s economy.

Early this month, Kim Jong Un conducted an inspection tour of the ‘Pyongsong Synthetic Leather Factory’ in South Pyongan Province, a facility producing consumer goods for the North Korean people. The Korean Central News Agency (KCNA) reported on July 12 that while there he said that “this factory has grown to become a treasured factory that actively contributes to improving the lives of the people.”

Since being appointed Chairman of the State Affairs Commission on June 29, an image of Kim Jong Un as ‘the leader who loves the people’ has become pronounced, with Kim visiting a Pyongyang Secondary school and a soft-shelled turtle factory.

Share

Hay, Kalb and Associates suspending operations

August 1st, 2016

According to Reuters:

North Korea’s first and only law firm set up by a foreigner, Hay, Kalb & Associates, will suspend operations, the firm’s principal said in a statement on Monday, as the country grows increasingly isolated.

The firm is a joint venture between the North Korean state and British-French citizen Michael Hay, who has represented foreign clients in the capital, Pyongyang, for 12 years.

Hay said he had made the decision based on “business and geopolitical principles”.

“This decision has been taken only after lengthy and thorough deliberation and an examination of the continuing deterioration of inter-regional relations pertaining to the Korean peninsula,” Hay said in a statement.

“It is not unreasonable to assume that no meaningful change or indicator of change in relations shall occur, if at all, until well after the United States Presidential Inauguration, on January 20, 2017,” Hay said in the statement.

North Korea has come under growing diplomatic pressure since its January nuclear test and a long-range rocket launch in February, which led to a new U.N. Security Council resolution in March that tightened sanctions against Pyongyang.

The majority of Hay’s clients are foreign investors, many of whom have been negatively affected by the sanctions, Hay told Reuters.

“Sanctions are hurting legitimate foreign investors. There still is no credible, consistent evidence I see of DPRK companies hurting,” Hay said. DPRK stands for Democratic People’s Republic of Korea, the North’s official title.

Very few foreigners live or work in North Korea. Those who do are usually members of the diplomatic or NGO community, although a small group of foreign investors have maintained a quiet and steady presence inside the country.

The suspension takes effect from midnight on Monday, Hay said, with an official suspension scheduled for Aug. 14, the firm’s 12-year anniversary.

Hay, who bills his firm as the only foreign-invested firm in North Korea, said he will still maintain an office in Pyongyang.

North Korea has more than 8,000 law graduates, according to an official 2008 census, half of whom are based in Pyongyang. Most are employed by the state.

Read the full story here:
North Korea’s only foreign-founded law firm suspends operations
Reuters
James Pearson
2016-8-1

Share

Is North Korea’s food situation really getting worse? The markets don’t think so.

July 22nd, 2016

By Benjamin Katzeff Silberstein

Since early 2016, the Food and Agriculture Organization of the UN (FAO) has been sounding the alarm bells on North Korea’s food situation. In an interview a few weeks ago with Voice of America’s Korean-language edition, FAO-official Christina Cosiet said that this years’ harvest would be the worst one in four years. One question, dealt with before by this blog, is how bad this really is. After all, the past few years seem to have been abnormally good in a long-run perspective.

But another obvious question is: why do market prices in North Korea tell the opposite story about food supply?

Prices for both rice and foreign currency (US-dollars) have remained remarkably stable for a situation where people should be expecting a worse-than-usual harvest. It is important to bear in mind that prices are largely seasonal and tend to increase in September and October. But unless prices somehow skyrocket in a couple of months, things do not look that bad.

There seem to be two possibilities here: either official production and food supply through the public distribution system simply does not matter that much, because shortages are easily offset by private production and/or imports. Or, the FAO projections simply do not capture North Korean food production as a whole.

For an overview of food prices in the last few years, consider the following graph (click here for larger version):

graph1

Graph 1: Prices for rice and foreign currency, in North Korean won. Prices are expressed in averages of local prices in Pyongyang, Sinuiju and Hyesan. Data source: DailyNK market prices.

As this graph shows, both the exchange rate and rice prices have remained relatively stabile over the past few years. Thus far, this summer has been no exception. The following graph shows exchange rates and rice prices from the spring of 2015 till July 2016 (click here for larger version):

graph2

Graph 2: Prices for rice and foreign currency, April 2015–July 2016, in North Korean won. Prices are expressed in averages of local prices in Pyongyang, Sinuiju and Hyesan. Data source: DailyNK market prices

This does not look like the behavior of a nervous market where supply is declining at a drastic rate. Of course, a number of caveats are in order: again, prices are likely to rise through September and October, as they have in the past. Moreover, markets may react to any harvest declines at a later point in time, as they become more apparent.

Even so, it seems inconceivable that market prices would remain so stable if North Korea was experiencing a steep dive in food production. After all, farmers would be able to see signs fairly early on, and their information would presumably spread through the market as a whole. In short, it is logically unthinkable that markets simply would not react to an unusually poor harvest.

This all begs the question of how much market prices tend to correlate with the FAO:s harvest figures overall. The short answer appears to be: not much. The graph below (click here for larger version) shows the average prices for rice and foreign exchange per year on the North Korean market since 2011, and harvest figures drawn from reports by the FAO and the World Food Program (WFP). (See the end of this post for a more detailed explanation of the underlying calculations.)*

graph3

Graph 3: Yearly average market prices for rice and US-dollar (in North Korean won), and FAO food production figures. Data source: DailyNK market prices

As this graph shows, there is generally fairly little correlation between market prices and harvests as calculated by the FAO. Harvests climbed between 2009 and 2015, while market prices climbed and and flattened out from 2012, around the time of Kim Jong-il’s death. Exchange rates and rice prices unsurprisingly move in tandem, but appear little impacted by production figures as reported by the FAO.

It is possible that prices react in a delayed manner to harvests, and that the price stabilization on the market is a result of increased harvests over time. But the consistent trend over several years, with prices going up as harvest figures do, is an unlikely one. Again, it is also difficult to imagine market prices not reacting relatively quickly to noticeable decreases in food production.

So what does all this mean?

It is difficult to draw any certain conclusions. But at the very least, these numbers suggest that the FAO food production projections are not telling the full story about overall food supply in North Korea. Moreover, market signals are telling us that food supply right now is far from as bad as the FAO’s latest claims of lowered production would have it. Rather, prices seem normal and even slightly more stabile than in some previous years with better harvests. In short, the narrative that this year’s harvest is exceptionally poor seems an unlikely one.

 

*A note on graph 3:

 For market prices per year, I calculated an average price from all observations in a given year. The DailyNK price data is reported for three cities separately: Pyongyang, Sinuiju and Hyesan. I have used an average of these three cities for each data observation as the base for calculating yearly averages. This is a somewhat tricky way of measuring, as the amount of data observations, as well as their timing, sometimes varies from year to year. The steep decline in 2009–2010 is primarily caused by the currency denomination, and should not be taken for a real increase in supply.

The FAO food production figures are not reported by calendar year, but published in the fall and projected for the following year. Since these figures best indicate available supply for the year after they are reported, I have assigned them to the year following the reporting year. That is, the figure for 2014 comes from the WFP-estimate for 2013/2014, and so on and so forth.

Share