North Korea’s 2020 parliamentary session and the budget: the main points

April 14th, 2020

By: Benjamin Katzeff Silberstein

This past Sunday, the 12th of April, the North Korean Supreme People’s Assembly met at Mansudae Assembly Hall, the grand, majestic room where the assembly sits. Out of the six items on the SPA’s agenda, at least three – half – dealt in some shape or form with the economy, and arguably, some others could also fit into that category:

The agenda items of the Third Session of the 14th SPA of the DPRK were decided at the session:

1. On adoption of the law of the DPRK on recycling resources

2. On adoption of the law of the DPRK on tele-education

3. On adoption of the law of the DPRK on providing living conditions for discharged officers

4. On the work of the Cabinet of the DPRK for Juche 108 (2019) and its tasks of Juche 109 (2020)

5. On implementation of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020).

6. Organizational matter.

(Source: “Third Session of 14th SPA of DPRK Held,” Korean Central News Agency, April 13, 2020.)

I include the Cabinet report given the strong emphasis over the past years of the cabinet’s leading role in economic management. A separate KCNA-report from the same day, “Report on Work of DPRK Cabinet for Juche 108 (2019) and Its Tasks for Juche 109 (2020),” summarized this report of the cabinet’s work. I paste it here with some annotating comments. Yes, the whole first paragraph below is one sentence:

According to the report on the work of the Cabinet delivered at the Third Session of the 14th Supreme People’s Assembly(SPA) of the Democratic People’s Republic of Korea (DPRK), last year the Cabinet organized a drive of putting the overall national economy on a new higher stage with a main emphasis put on accomplishing the sustained economic development, ensuring the local production of equipment, raw and other materials and revitalizing production by boosting the capability of independent development of the country, true to the important tasks set forth by Supreme Leader Kim Jong Un in his report at the Fourth Plenary Meeting of the Seventh Central Committee of the Workers’ Party of Korea and in his historic policy speech at the First Session of the 14th SPA.

None of these phrases (“local production of equipment” etc) are new or surprising, and the most notable fact is perhaps the absence of anything unusual in such an unusual time (coronavirus, sanctions).

The report said that last year all sectors and units of the national economy carried out the gross yearly industrial production value at 108 percent, and ministries, national institutions, the city and county people’s committees and industrial establishments over-fulfilled their national economic plan.

The electrical power industrial sector carried out the hydraulic power generation plan at 103 percent and made sure that production was increased by properly carrying on the repair and readjustment of generating equipment.

Now this is interesting – repairing and readjusting could either mean a claim that the industry is doing fine even without imports of Chinese machine parts and the like, because it can simply repair and readjust what’s already there. Or, it’s a claim that in fact, despite sanctions, the country’s industries are able to replenish whatever equipment it needs to stay afloat.

The thermal power plants provided a guarantee for stabilizing the electric power production without relying on heavy oil.

The coal industrial field respectively showed 23 percent and 22 percent increases in the coal production and the supply of coal for thermal power generation over last year, and the large-scale coal mines rich in deposits and with favorable mining conditions provided a foundation to increase coal production.

In the field of the metallurgical industry the Kim Chaek Iron and Steel Complex has shown 22 percent, 2 percent and 37 percent increases in the production of pig iron, steel and rolled steel over last year. The chemical industry achieved large growth in the production of chemical fertilizer, carbide and caustic soda.

Of course, any claims of over-fulfillment of quotas and the like should be taken with a grain of salt, as such claims are classical in North Korean propaganda regardless of their foundation in reality (the genre was born in the Soviet Union). Still, trying out a charitable reading, there are theoretical ways in which claims over over-fulfillment could technically be true, particularly in these sectors. We know nothing about the revenue of these products, for example, and mines and factories could churn out production in great magnitudes but with questionable value when the products can’t be exported or sold at a profit at all. Because coal prices have dropped so much under sanctions, industry could well be powered at a lower cost, but the value of this is, again, questionable.

[…]

On the agricultural front the peak-year level was exceeded in the grain production even under unfavorable weather conditions.

A repetition of the claim of a bumper harvest last year, which remains highly unlikely, as I argued here.

A fishing campaign for supplying more fish to the people was launched in the fishery sector, and the fishing was put on a higher scientific level with the help of the updated aid system for detecting fishing ground.

Again, the sector may certainly produce and supply more, but its incomes will still be lower than they would be without sanctions.

The field of the land and environment protection turned the important projects including the Wonsan Kalma coastal tourist area and the Yangdok Hot Spring Resort into thick woodland and greenery and face-lifted all roads including Pyongyang-Hyangsan and Pyongyang-Wonsan Motorways.

A hint that investment continued in the tourism industry, and that the state expects this industry to blossom in the future, despite the currently dire situation. By extension, perhaps also a suggestion of expected solid economic ties and exchange with China.

The report contains a great deal of interesting detail, but in the interest of time, I’ll skip ahead to the most central parts (my own emphasis):

The report emphasized that all the achievements made last year clearly proved once again that as long as there is the wise guidance provided by the Party, we can live on our own and open up the road of our own development and prosperity no matter how desperately the enemies may try.

The report also said that serious mistakes were found in the work of the Cabinet last year.

They taught a serious lesson that if the officials in charge of providing economic guidance fail to fulfill their duty, it would be impossible to successfully attain the goals of economic construction set forth by the Party, the report said.

It clarified that we face heavy yet responsible tasks to unconditionally and thoroughly carry out the economic construction tasks set forth at the 5th Plenary Meeting of the 7th Central Committee of the WPK under the uplifted slogan “Let’s Break through Head-on All Barriers to Our Advance!”

It went on:

The Cabinet will put a main emphasis on organizing the economic work on the principle of subordinating everything to the health and safety of the people, conducting courageous head-on breakthrough in the spirit of achieving prosperity by dint of self-reliance, and fully meeting the needs for the national economy and for the people’s living by readjusting the economic foundation of the country and by fully tapping the production potential, in order to thoroughly carry out the tasks set forth in the joint resolution of the WPK Central Committee, State Affairs Commission and the Cabinet.

The Cabinet will rationally readjust the economic work system and order and boost its role as the organizer of the state economy.

It will put efforts into holding full control of the resources and fund sources of the state, and securing financial ability and execution power capable of managing and operating the country’s economy in a unified manner.

There are some key phrases below as well, but these two paragraphs are especially noteworthy. The message seems fairly clear that the state’s role in the economy needs to get stronger, and that while independent management methods may certainly be encouraged, the state is in charge. This message is familiar from Kim Jong-un’s December CC Plenum speech.

It will establish a strict discipline for the state development and use of the underground natural resources that are of strategic significance in the state economic development, and also take strong measures to protect and multiply aquatic resources.

It will bring about innovation in the work system, order and method on the principle of ensuring smooth transaction in the overall trade, and thoroughly guarantee the economic benefits of the country through the application of strict discipline and order in the import and export.

Perhaps both a reference to easing some rules and regulations for trade, while also combatting the rampant trade deficit?

[…]

The coal industrial sector will fully meet the demand for coal from several fields of the national economy including electricity, metal and chemical industries.

Note the absence here of any reference to coal exports.

[..]

The light industrial field will expand the variety of daily necessities and boost their quality. It, regarding the local production of raw and other materials as the lifeline, will rely on the locally available raw and other materials as much as possible for the production of consumer goods, put efforts into the development of local industry and contribute to the improvement of people’s standard of living.

Making consumer goods production and supply more local, and less reliant on imports, has been one of the chief goals through Kim Jong-un’s tenure. Judging by, for example, this recent report about consumer choice in kitchen items, it seems to be going quite well.

The Cabinet, corresponding to its position and duty as the economic command, will ensure the definite provision of unified operation and command for implementing the economic policies of the Party, and guarantee the meticulous economic organization and persevering practices and thus fulfill its responsibility and duty in glorifying this year marking the 75th founding anniversary of the Party as a year of victory to be specially recorded in the history of the country, the report stressed.

The report ends with one final emphasis on the Cabinet, and thus, the state, and not grassroots, independent actors, as the main holders of power in the economic realm. “The economic command” is about as clear of an expression as you could imagine. This doesn’t necessarily mean that the state will try to curb the market system anytime soon, but it will continue to subvert market forces into its own institutions where they can be more easily controlled and generate cash to the state.

The above is just a brief overview and quick read of the budget report. For more on the proportions and overall economic conditions that the report speaks of, check out Ruediger Frank’s recent 38 North article on the SPA session as a whole.

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Politburo meets, but SPA postponed (till following Sunday)

April 12th, 2020

Benjamin Katzeff Silberstein

The SPA was expected to meet this past Friday. It didn’t. (Update 13/4/: it instead met on the following Sunday.) Instead, the politburo held a meeting to discuss measures the SPA would be adopting. There were scant but clear references to economic affairs (highlighted below), though the KCNA report is very vague. NK News suggests the SPA may instead convene Monday.

It adopted the joint resolution of the Central Committee of the WPK, the State Affairs Commission of the DPRK and the Cabinet of the DPRK “On more thoroughly taking national measures for protecting the life and safety of our people from the worldwide epidemic disease”.

The joint resolution detailed the goals of continuously intensifying the nationwide emergency anti-epidemic services and pushing ahead with the economic construction, increasing national defence capability and stabilizing the people’s livelihood this year, and indicated the tasks facing every field and every unit including Party and government organs and working people’s organizations and armed forces organs and ways of carrying them out.

It studied and approved “On the execution of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020)”, the second agenda which is to be presented to the Third Session of the 14th Supreme People’s Assembly.

(Source: Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un, Korean Central News Agency,” 12/4/2020.)

Update 13/4/2020: the SPA was held on Sunday instead. KCNA:

The third Session of the 14th Supreme People’s Assembly (SPA) of the Democratic People’s Republic of Korea (DPRK) was held at the Mansudae Assembly Hall on Sunday.

The SPA deputies attended the session.

Seen on the platform were Choe Ryong Hae, member of the Presidium of the Political Bureau of the Central Committee of the Workers’ Party of Korea (WPK), first vice-chairman of the State Affairs Commission (SAC) of the DPRK and president of the Presidium of the SPA, and Pak Pong Ju, member of the Presidium of the Political Bureau of the WPK Central Committee, vice-chairman of the SAC of the DPRK and vice-chairman of the WPK Central Committee.

Also seen there was Kim Jae Ryong, member of the Political Bureau of the WPK Central Committee, member of the SAC of the DPRK and premier of the Cabinet.

The platform was also taken by Ri Il Hwan, Choe Hwi, Ri Pyong Chol, Kim Tok Hun, Kim Yong Chol and members of the SAC of the DPRK and the Presidium of the SPA.

The chairman and vice-chairpersons of the SPA took their seats.

The opening address was made by Chairman Pak Thae Song.

The agenda items of the Third Session of the 14th SPA of the DPRK were decided at the session:

1. On adoption of the law of the DPRK on recycling resources

2. On adoption of the law of the DPRK on tele-education

3. On adoption of the law of the DPRK on providing living conditions for discharged officers

4. On the work of the Cabinet of the DPRK for Juche 108 (2019) and its tasks of Juche 109 (2020)

5. On implementation of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020).

6. Organizational matter.

The first, second and third agenda items were discussed at the session.

Deputy Thae Hyong Chol, vice-president of the Presidium of the SPA, made a report on the three agenda items.

He referred to the importance and significance of the laws to be discussed and adopted at the session, and explained the chapters of the laws.

He laid the adoption of the three laws before the SPA.

Ordinance of the SPA of the DPRK “On adoption of the law of the DPRK on recycling resources “, “On adoption of the law of the DPRK on tele-education” and “On adoption of the law of the DPRK on providing living conditions for discharged officers” were adopted with unanimous approbation at the session.

There was a discussion on the basis of an in-depth study of the reports on the fourth and the fifth agenda items.

The speakers said that the work of the Cabinet and the execution of the state budget for last year were correctly summed up, and that the tasks of the Cabinet for this year were clearly set and the state budget was properly worked out in the direction of implementing the decisions adopted at the 5th Plenary Meeting of the 7th Central Committee of the WPK and the joint resolution adopted at the Meeting of the Political Bureau of the WPK Central Committee. They voiced full support and approval.

In their speeches they analyzed and reviewed the successes, experience, mistakes and lessons in the work of their fields and units last year and referred to the methods of opening a broad avenue to the socialist construction and propping up the self-supporting economic power.

There adopted decision of the SPA of the DPRK “Report on the work of the Cabinet of the DPRK and on approving the implementation of the state budget for Juche 108 (2019)” and ordinance of the SPA of the DPRK “On state budget of the DPRK for Juche 109 (2020)”.

The session discussed the sixth agenda item.

At the request of Deputy Choe Ryong Hae, first vice-chairman of the SAC and president of the Presidium of the SPA upon authorization of the Chairman of the State Affairs Commission of the DPRK, Deputy Choe Pu Il and Deputy No Kwang Chol were recalled from the membership of the SAC.

Also recalled were Ri Su Yong, Thae Jong Su and Ri Yong Ho.

Deputies Ri Pyong Chol, Kim Hyong Jun, Kim Jong Gwan, Ri Son Gwon and Kim Jong Ho were by-elected as members of the SAC.

Upon authorization of the Political Bureau of the WPK Central Committee, Deputy Ko Kil Son was by-elected as the secretary general of the Presidium of the SPA and Deputy Kim Yong Hwan as a member of the Presidium of the SPA.

Members of the Cabinet were newly appointed.

Upon authorization of the WPK Central Committee, Deputy Yang Sung Ho was appointed as vice-premier, Deputy Kim Chol Su as minister of Natural Resources Development, Kim Jong Nam as minister of Machine-building Industry, and Ri Song Hak as minister of Light Industry.

Chairmen of the Subcommittees of the SPA were recalled and by-elected.

Deputy Kim Jong Ho was by-elected as chairman of the Legislation Committee of the SPA, Deputy Kim Tok Hun as chairman of the Budget Committee and Deputy Kim Hyong Jun as chairman of the Foreign Affairs Committee.

Chairman Pak Thae Song made a closing address.

(Source: “Third Session of 14th SPA of DPRK Held,” Korean Central News Agency, 13/4/2020.)

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North Korea needs to counter the economic impacts of COVID19, but what can it really do?

April 10th, 2020

By: Benjamin Katzeff Silberstein

Many countries are adopting stimulus measures to counter the economic impacts of the drastic economic slowdown resulting from measures to counter the COVID19 outbreak. North Korea, too, badly needs to counter the likely devastating impacts of its border shutdown to China, but it has no funds to adopt measures even nearly comparable to ordinary stimulus measures. As Yonhap speculates here, the Supreme People’s Assembly today (Friday April 10th) are scheduled to meet and may announce policies to counter the economic impacts, but it’s unclear what they can really do:

North Korea’s rubber-stamp legislature was to hold a once-or-twice-a-year session on Friday, with economic and public health issues expected to take center stage amid its ongoing fight against the novel coronavirus.

The Supreme People’s Assembly (SPA) usually meets in April every year to address the state budget and Cabinet reshuffling, but it has been closely watched from outside for any glimpse into the reclusive state’s stance on foreign affairs, including its stance on denuclearization talks with the United States.

Friday’s meeting, however, is expected to center on discussions of major domestic issues, given that Pyongyang has been making all-out efforts to block the outbreak of COVID-19 on its soil.

North Korea is among just a few countries in the world that claim to have no coronavirus infections, generating speculation that it might be hushing up an outbreak.

Pyongyang has tightened control of its borders with China, where the coronavirus originated in late December. It has also toughened quarantine criteria and restricted the movement of people and goods.

In particular, the border closure with China could weigh on its already moribund economy long crippled by global sanctions, as it depends heavily on the neighboring ally for its trade.

It is unclear whether leader Kim Jong-un will attend the SPA meeting. Observers say that he is unlikely to be present as he was not among deputies elected in March last year to the parliament.

Kim attended last year’s meeting to give a policy speech at the session.

Earlier in the day, state media reported that Kim has supervised a mortar firing drill. It did not provide details on when and where the drill took place, but such military activity is usually reported a day after it happened.

But there have been no state media reports on a politburo and a plenary meeting of the ruling Workers’ Party, which used to be held with Kim in attendance ahead of an SPA session.

Experts say that the North could announce an increase in its budget to improve public health infrastructure and unveil measures aimed at cushioning the impact of its anti-virus campaign on its economy during the SPA meeting.

(Source: “N. Korea set to hold parliamentary meeting amid nationwide virus fight,” Yonhap News, April 10th, 2020.)

The North Korean government doesn’t entirely lack resources, but it doesn’t have the sort of budgetary flexibility that a government needs to launch serious stimulus programs. It could theoretically ease up on restrictions on economic activity, such as decrease fees for market traders (markets are themselves problematic given the risk of the virus spreading there), ease up on permit regimes for various sorts of economic activity, lower mandatory fees and taxes, and the like. This is unlikely to happen, since the state itself already faces serious economic woes, and local-level government institutions likely will not be content with having a crucial source of income curtailed. More to follow after the SPA meeting results are announced.

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North Korean public health expert claims zero coronavirus cases

April 2nd, 2020

Benjamin Katzeff Silberstein

In an interview with Kyodo earlier this year:

Pak Myong Su, president of North Korea’s State Hygienic Control Board, made the remark in an interview with Kyodo News and other foreign media outlets.

“If such a virus spreads in our country with a small population and a small territory, a serious disaster could not be avoided, in which thousands or tens of thousands of people are deprived of their lives,” Pak said in Pyongyang.

In mid-March, Gen. Robert Abrams, the commander of U.S. forces in South Korea, said at a press conference that North Korea “is a closed-off nation, so we can’t say emphatically that they have cases, but we’re fairly certain they do.”

South Korean media have also reported that many North Koreans have died from the pneumonia-causing virus currently sweeping the world.

Late last month, Japanese Foreign Minister Toshimitsu Motegi told reporters in Tokyo, “If there is no infected person in North Korea, which is contiguous with China and South Korea, it is extremely miraculous.”

Pak stressed that North Korea has stepped up measures to prevent a coronavirus outbreak, including cutting off traffic to and from China and Russia since earlier this year.

He added that citizens have been urged by the country’s health authorities to wear masks when they go outside.

(Source: “N. Korea has no infected people with new coronavirus: expert,” Mainichi/Kyodo, April 2nd, 2020.)

I’ve written here about why this is extremely unlikely to be true, bordering on the impossible.

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North Koreans buy more domestically manufactured home electronics

April 2nd, 2020

Benjamin Katzeff Silberstein

Kim Jong-un has long sought to make North Koreans less dependent on imports, and buy more domestically manufactured products. According to one recent Daily NK report, the trend toward domestically manufactured goods continues:

North Koreans have long purchased TVs, electric rice cookers, refrigerators, fans and heaters imported or smuggled from China or even South Korea.

South Korean products sold in local markets typically have had their brand names obscured or forged to look like they came from China. Sellers would generally verbally tell buyers where the products really came from.

North Korean products are now increasingly sought out by locals, however, partly because of their cheaper prices and growing variety; other times, they are the only products available because of international sanctions and – more recently – the shutdown of the Sino-North Korean border.

INCREASING PREFERENCE FOR HOMEGROWN PRODUCTS

“There are now TVs branded with the names of North Korean manufacturers like Arirang, Mallima and Yomyong,” a South Pyongan Province-based source told Daily NK on Mar. 31.

“There are a wider variety of North Korean mobile phones available now, too, from the Arirang flip phone to the Pyongyang 2425 smartphone, the Phurun Hanul, the Jindallae series and more,” he added.

Homegrown solar panels, electric bicycles and water purifiers have also been spotted being sold at Pyongsong Market, located in South Pyongan Province near the capital Pyongyang. Although North Koreans still reportedly prefer South Korean electronics products – if they can afford them – many also see Chinese and North Korean products as acceptable alternatives.

Pyongsong Market’s electronics wholesalers typically have a list of products in stock for potential buyers and will lead interested buyers to separate storage facilities to view the products. Now, however, the quantity of homegrown electronics products has reportedly increased significantly at these storage centers.

In the past, Japanese-made products dominated the markets before consumers increasingly turned to products made in China and South Korea. Now consumers are opening their wallets to buy more and more North Korean-made products.

“Families will purchase appliances that consume large amounts of electricity, such as air conditioners, refrigerators and washing machines,” one source told Daily NK. “They’ll purchase the appliances they need according to how many people are in their family, and according to how much they can spend.”

BASHING THE “IMPORT DISEASE”

With the rise of coffee and tea culture in North Korea, locally-manufactured water purifiers and electric kettles have also become increasingly popular.

“Smoke detectors and burglar alarms are a given for city-dwellers, who will sometimes purchase electronic appliances to brew their coffee or tea,” the source said.

“It’s pretty normal for one household to have about five electronic appliances. The better-off households will have, at minimum, a refrigerator, a heater and washing machine. And, given that many women are breadwinners, massage machines for tired muscles, beauty appliances like hair dryers and kitchen appliances are also quite popular,” the source added.

(Source: Kang Mi Jin, “N. Koreans increasingly seek out homegrown electronics,” Daily NK, April 2nd, 2020.)

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April 1st, 2020: Latest market prices in North Korea

April 1st, 2020

By: Benjamin Katzeff Silberstein

In the past few days, Daily NK updated their market price index. The latest price data was sourced on March 20th, but posted at least a couple of weeks later. A few quick observations:

In general, rice prices continue to decline, although not by very much. The average rice price went down by 1.4 percent from the previous price observation, on March 7th. This is hardly enough to be truly significant. As I wrote on 38North recently, the price drop may not be caused by an increase in supply only, but also by increasing enforcement of price controls by the government.

Foreign exchange rates have appreciate significantly since before the coronavirus border closure, and continue to climb still. The RMB has, interestingly, appreciate much more than the US dollar. The dollar climbed by 1.4 percent in the last price observation compared with late December last year, while the RMB went up by almost ten percent during the same time period. Between March 7th and March 20th, the USD appreciate by 0.55 percent, and the RMB by 1.2 percent. North Korea thereby goes counter to the international trend, where the dollar has appreciated significantly over the RMB. This makes sense, however, since the border closure has cut the supply of Chinese goods drastically, thereby raising their price. A significant share of trade in these goods occurs in RMB, and it is only logical that the price would go up.

More on this during the weeks to come…

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Fertilizer shortages in North Korea due to border lockdown

April 1st, 2020

Benjamin Katzeff Silberstein

Reports Daily NK:

North Korea’s farms in the country’s breadbasket are suffering from a lack of fertilizer and other agricultural supplies amid the shutdown of the Sino-North Korean border, Daily NK sources have reported.

“Farms are lacking agricultural supplies throughout the province even as we are heading into the planting season,” a North Hwanghae Province-based source reported on Mar. 31.

North Korean farms typically focus on preparing for the year’s farming during January to March, acquiring needed fertilizer, pesticides and other supplies.

The country’s agricultural sector, however, relies on imports of agricultural supplies and typically trading companies are putting on all their efforts into acquiring supplies during this period.

With the closure of the Sino-North Korean border and a general halt in trade and smuggling across the border, however, farms are not getting the supplies they need this year.

“North Korean authorities are telling farms to figure out things themselves, even telling them to make their own electricity,” the source said. “Farmers are upset.”

North Korean officials have moved to increase supplies of fertilizer to farms by ordering fertilizer factories throughout the country to increase their production beyond this year’s original production quotas.

“Factory managers are full of anxiety because they have to create massive amounts of fertilizer – more than they are accustomed to,” the source noted.

North Korean cities and counties typically have their own fertilizer factories. Most of these factories, however, are small-scale and are unable to produce enough to supply all the farms in their respective areas.

(Source: Ha Yoon Ah, “N. Korea’s farms face shortages of fertilizer and other supplies,” Daily NK, April 1st, 2020.)

More than immediate rice prices rising, this sort of news is perhaps the most concerning in the long run, and we’ll only begin to see the effects in a few months.

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North Korean ships not stopping in Chinese ports

March 29th, 2020

Benjamin Katzeff Silberstein

The New York Times reports that North Korean ships that would usually transport goods to Chinese ports are now idle in Nampo:

The Royal United Services Institute satellite analysis shows that on March 3, 139 ships were idled in the Nampo area, which includes the anchorage and several ports, up from 50 ships a month earlier.

The fleet includes vessels previously implicated in sanctions evasion operations, which are often tracked through satellite imagery and aerial or ground surveillance by other states, independent research groups and the United Nations.

The institute’s analysis said the idled ships included some of the “most active and scrutinized oil tankers” used for the illicit import of refined petroleum products such as fuel. For example, the oil tanker New Regent, which had been spotted making unreported deliveries as recently as January 2020, and twice in 2019, according to the United Nations, was seen in Nampo in multiple satellite images. Other ships, too, have been floating unused for weeks, according to satellite imagery provided by Planet Labs, an earth-imaging company in San Francisco, and Maxar Technologies Inc., a space technology company in Westminster, Colo.

(Source: Christopher Koettl, “Coronavirus Is Idling North Korea’s Ships, Achieving What Sanctions Did Not,” New York Times, March 26, 2020.)

As the article points out, coronavirus really is doing what sanctions never fully could. It seems that the only fully confirmed mode of goods transportation between North Korea and China right now are trains (judging by the Rodong pictures of Corona prevention activities), and we don’t know how often they run.

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Of price controls and panic: North Korean market prices under Corona

March 27th, 2020

By: Benjamin Katzeff Silberstein

(Note: the graphs in this piece are from a shortly forthcoming article on 38 North.)

It’s almost like those mandatory disclaimers that often follow advertisements in the United States, but the statement that all information from inside North Korea is uncertain can sometimes not be repeated often enough. This is especially true in a situation like the current one, where the country’s borders are virtually shuttered, and global anxiety is high to begin with.

With that, let’s take a look at some numbers…

With North Korea’s border closing earlier this year, market prices quickly shot up as consumers most likely hoarded goods in anticipation of future shortages. Particularly curious was the fact that prices seemed to differ so widely between cities, as I wrote about here. This suggested that internal restrictions on movement between localities, a measure the state took to control the spread of coronavirus, were working. A few weeks later, however, both market prices and the differences between cities seemed to go down again.

Differences in rice prices, in percentage, between three North Korean cities, until March 7th. Data source: Daily NK.

So did market prices in general. In the latest price data observation from Daily NK, from March 7th, average rice prices are about 25 percent higher than a year ago, and 29 percent higher than in early December, before the border closure. That’ a lot, but somewhat less than the initial 36 percent increase when the border was closed initially. Even the slightly lower price increase would spell severe difficulties for many North Koreans in buying food. Note: the latest price observation is from March 7th, that is, several weeks ago.

Average rice prices in North Korea, until March 7th. Data source: Daily NK.

So, what happened here? There are two possibilities that I think are more likely and realistic than others. One is that markets overreacted in their initial anxiety. Put simply, people may have thought that supply would become much lower than it ended up being. This is a common mechanism in markets in general. People often react more strongly than called for to anticipated, future changes, and then adapt their economic behavior once it’s clearer what actual conditions of supply and demand are. It’s also possible that the government let up on conditions for imports and trade, easing the burden on supply.

But there is another possibility. Both Rimjingang and Chosun Ilbo have reported that the government has instituted price controls to prevent prices from rising. This was only to be expected, as it is one of the few tools the state has at its disposal to control market anxiety. Price controls, however, are rarely (if ever) effective in the long run in countries such as North Korea. Either trade moves to the black market, or sellers run out of goods as they are forced to sell for less than consumers are willing to pay.

Aside from the two aforementioned reports, there are other potential signs that price controls may be in place. The price difference between Hyesan and Pyongyang/Sinuiju went down to a conspicuously low level, one that is actually lower than normal, a very odd coincidence. It got there only over the span of a few weeks, getting close to the 5,000 won-level reported by Chosun as the price ceiling. As far as currently available information can tell, no conditions changed on the ground. It would be reasonable to assume that at some point, the government may let up on restrictions on trade to ease conditions, but we don’t know whether that has happened yet. Reports of harsh measures against smuggling continue, and such measures would signal to the markets that state enforcement of the border closure remains and will remain harsh. So while in theory it makes sense that prices would go down somewhat after the initial spike, conditions on the ground have not changed noticeably, as far as we know.

So, what might have happened is that at least around March 7th, the government was still somewhat successful at enforcing its price ceiling, at least in parts of the country. One of Chosun’s sources reports that as of March 18th, rice cost 6,300 won per kg in Hyesan, much closer to the initial price level after the border closure. Price ceilings can usually only be enforced for a limited period of time, particularly when real shortages loom of essential products. Prices either rise beyond the ceiling, goods run out, or a black market arises. If the regime is indeed enforcing a price ceiling, and it continues to do so for a long time, perhaps we will see an increase in back-alley markets and other type of economic activity that the government has been relatively successful at curbing by integrating the markets into the official economic system over the past decade and a half or so.

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Some N Korea-China trade stats for 2019

March 23rd, 2020

By: Benjamin Katzeff Silberstein 

Nikkei Asian Review analyzes some 2019 trade data:

North Korean exports to China increased 10.8% to $216 million, while imports jumped 16.8% to $2.59 billion, the Seoul-based Korea International Trade Association said Thursday.

The trade deficit increased by $350 million, four times the deficit from 2016, before the U.N. imposed heavy sanctions on top North Korean exports like coal and apparel.

Clocks and watches were North Korea’s biggest export to China last year at $49 million. Parts for time pieces ranked high among its imports, and the country is believed to be assembling clocks on contract from China.

(Source: “Wigs and watches keep North Korea’s economy ticking under sanctions,” Nikkei Asian Review, March 20, 2020.)

In reality, things are of course much more complicated than this. At a time when sanctions remain but we still pretty much know that China has reverted to importing certain banned items from North Korea, North Korea’s effective trade deficit cannot really be studied through official data. Likely, imports that come through and are recorded officially correspond, to some extent, to exports flowing outward under the radar.

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