Famine, Amartya Sen, and the Markets of North Korea

May 20th, 2019

By Benjamin Katzeff Silberstein

The market factor in North Korea’s current food crisis* sometimes seems unclear. Some have talked about the market compensating for what the state doesn’t provide in the event of a food shortage. But the WFP’s methodology should cover for that. They don’t only calculate collective farms yields specifically, but arable land and production in general. Their estimates may (it’s not entirely clear) be based on data for total farmland available provided by the state, and there are some types of plots that wouldn’t be covered in that case. But WFP uses satellite imagery to verify official information on production figures (see p. 5 of their rapid food security assessment for North Korea).

We don’t know how big a proportion of the total amount of food produced in North Korea is sold on the markets, and how much is distributed through state and semi-state channels such as enterprises and factories, which are sometimes partially operated privately. In any case, when they measure total harvests, this likely, at the very least, includes most sources for the food that’s sold on markets. So a drop in total production still means lower market supply.

So why are markets still so important to understand food security, and why is it a problem that WFP cannot access them freely? Rest assured, this is not for a lack of trying. From pp. 6–8 (my emphasis added):

The assessment team also experienced challenges in accessing markets and acquiring market-related data. However, the team was not able to visit farmers’ markets during the field visit. While authorization was granted at national level to visit farmer’s markets, county authorities informed that they were not able to receive any foreign delegation on the day. Market visits are highly recommended to fill this information gap in future assessments. Finally, the team could only gather limited information on people’s incomes and expenditures during the household surveys.

Again, WFP’s conclusions are still highly relevant and meaningful. But as they themselves recognize, markets are crucial for understanding the microeconomic conditions on the ground in North Korea.

The most important reason, perhaps, is that distribution of food is just as important as food production for food security. As Amartya Sen has shown, food security is often more about who has an “entitlement” to food than about precisely how much food is around. This is where North Korea’s markets come in. Total production is an important metric to be sure, but to really understand how food is distributed, and who gets to eat, we have to also understand precisely how the markets work. We need to understand who uses them and how much they’re able to buy. Prices tell us something about overall supply (though as I have argued, probably not the full story).

Especially in a country like North Korea, where access to food and sustenance is a political matter, distribution (or entitlements) is more than total food production for food security. The markets are a crucial mechanism for distribution in North Korea. As long as WFP isn’t allowed to survey them, and to do more extensive household surveys freely in the country, we won’t truly know what food security looks like.

 

*We still don’t know that there is a crisis at hand, although the food situation appears very poor.

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Food crisis looming in South Pyongan, according to Daily NK

May 16th, 2019

Benjamin Katzeff Silberstein

Following the recent publication of a UN report stating that North Korea’s food situation is critical and is set to worsen, sources in the country say that efforts for agricultural preparation are facing obstacles in some regional areas.

The DPRK Rapid Food Security Assessment was published by the World Food Program and Food and Agricultural Organization of the United Nations on May 3, and expressed concern that North Korea could face severe food shortages within the next ten years due to climate change, sanctions and other issues.

“May is the most important month because it is the period that determines whether the year’s harvest will end in success or failure. There’s a lack of workers for planting and this has led to alarm amongst officials,”a South Pyongan Province-based source told Daily NK. “Officials in the major west coast farming areas of Pyongwon, Sukchon and Mundok are concerned about labor shortages.”

North Korea conducts national agricultural support campaigns every spring and mobilizes students, office workers and housewives into the fields. This year, however, the country is facing a labor shortage of more than 50%, according to the source.

“Mobilization orders state that people have to prepare their own food to eat out in the fields,” he said. “Concerns have been raised that there’s a lot of people who can’t do that because there’s no food.”

The North Korean authorities are emphasizing the need to increase rice production and the importance of agriculture through state-run media as the planting season begins, but mobilizing workers into the fields will be difficult due to the country’s poor economic situation.

Concerns have also been raised that laborers will refuse to work in the fields because they are already involved in manure collection activities, construction projects and other labor-intensive work for the state.

Daily NK recently reported that even one of Kim Jong Un’s banner projects, the Samjiyon modernization effort, is facing labor-related difficulties.

The authorities have even created “emergency measures committees” to identify ways to forcibly mobilize residents onto the fields.

“Labor departments in provincial agriculture business committees have formed emergency measures committees to deal with the lack of workers recruited from factories and schools,” said a separate source in South Pyongan Province. “Schools and factories are being investigated and will face legal action if they fail to provide the proper quotas of labor.”

Some parts of the country are faced with issues in agricultural planting stemming from insufficient supplies of farming materials and fertilizer.

“Farmers should have ensured the soil didn’t freeze by creating special seedbeds and covering them with vinyl film. They failed to do so because there was a lack of vinyl film available this year and seeds didn’t grow properly because of the cold,” she said, adding that “they also lacked manure and fertilizer.”

Source:
South Pyongan Province faces severe food security crisis
Mun Dong Hui
Daily NK
2019-05-16

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Washington Post on sanctions and North Korea’s food crisis

May 8th, 2019

Benjamin Katzeff Silberstein

A few interesting snippets from this Washington Post report:

Analysts say there is no doubt that the ultimate blame for the humanitarian crisis rests with Pyongyang, which has spent hugely on nuclear advances and other military projects while neglecting the welfare of ordinary citizens.

[…]

“Other than the most basic of subsistence agriculture, there is no agricultural sector in the world that can survive without oil-based inputs,” said Hazel Smith, a professor in Korean studies at the SOAS University of London.

Smith argues North Korea can feed its citizens only if it can access oil and natural gas — to fuel farm machinery, power processing and storage facilities, used in irrigation and to transport crops and food.

United Nations report issued Friday showed more than 10 million people do not have enough food to last until the next harvest. Last year’s crop was the worst in a decade, it said, and was buffeted by dry spells, heat waves and flooding.

But it also found that “limited supplies of agricultural inputs, such as fuel, fertilizer and spare parts have had significant adverse impact.”

The Food and Agriculture Organization and World Food Program spelled out “the unintended impact of sanctions on agricultural production,” most obviously “the importation of certain items that are necessary for agricultural production.”

Article source:

North Korea is facing a food crisis. ‘Maximum pressure’ by the U.S. may make it worse.
Simon Denyer
Washington Post
2019-05-08

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Is China trying to destroy North Korea?, wonders this North Korean trader

May 7th, 2019

Benjamin Katzeff Silberstein

I suppose the headline for this post might count as clickbait in our field, but I couldn’t help it… Daily NK:

North Korean workers in China facing visa denials or restrictions on their sojourn periods are being forced to return home, according to an affected source in China.

A North Korean trader in Liaoning Province recently told Daily NK by phone that Chinese authorities are demanding that all North Korean workers return home.

“I do business in Liaoning Province. China is making a big fuss and ordering us out [of the country] and now my Chinese visa has almost expired. But few North Koreans actually care about their visa status in China. China telling us to leave and it’s making me really angry and annoyed,” he said.

“A lot of people are returning home. This happened in the past, but this time is different. I asked a North Korean customs official and he said that half of the North Koreans in Dandong have left. That’s a huge number of people. Those who remain are worried about their status here. People who work in China generally have debts to pay back. I sometimes wonder if China is trying to destroy North Korea.”

He also spoke about his own precarious situation.

“I’ve brought over many workers myself into China. Each of them gave me 500 dollars and I found them work in factories run jointly with China. They’re all 500 dollars in debt. They can’t repay this money, so they’re worried about returning home. They could get beaten up or even die if they can’t repay their debts,” he said.

“I haven’t been able to contribute enough to the [regime’s] loyalty fund either. Returning home would be a death sentence. I’d rather die here (in China) before my body returns home.”

Full article:
North Korean trader in China expresses concerns about his own precarious situation
Ha Yoon Ah
Daily NK
2019-05-07

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Taxes increase on some North Korean markets

May 3rd, 2019

By Benjamin Katzeff Silberstein

This sort of news is very interesting, particularly in context: I’ve heard from people who deal with North Korean firms that some of them have received orders to tighten up their accounting, and report their assets to the state in greater detail. Taken together, these snippets of information suggest an overall difficult economic situation, though not desperate or in crisis-mode, where the state is taking more and more measures to drive in cash from the public.

Daily NK:

Sales fees levied on private distributors have risen in some areas of North Korea. The fees are managed by North Korea’s collection agency and essentially provide a source of tax revenue for the state. Private distributors are expressing discontent over the changes as many are suffering under the country’s already poor economic conditions.

“The authorities recently began demanding outrageous and unfair selling fees from private distributors,” said a South Pyongan Province-based source on April 25. “Collection offices (i.e. tax offices) attached to local people’s committees are required to pay varying fees depending on the product, and the number of fees have been doubled.”

These de facto tax offices were established in each city and county as part of the July 1 Economic Management Improvement Measure in 2003 and are managed by the Ministry of Financial Administration. The offices collect fees for land use, market stalls, and various other reasons.

“The authorities are demanding a huge amount of fees to gain control over and restrict the activities of private business people who live in Pyongsong but bring in products from Sinuiju, Rajin-Sonbong, Nampo and Hyesan,” said a separate source in South Pyongan Province.

“Soybean oil sellers, for example, had to pay 3% of their income before, but now have to pay twice that amount.”

The skyrocketing fees are likely due to the fall in tax revenue arising from the economic difficulties the country is facing.

“The government increased the fees they were collecting just as incomes fell among private business people,” she said. “The authorities are simply taking money from the people to make it seem like the state is self-sufficient.”

North Korean authorities have made the fee system more sophisticated while raising fees as part of efforts to generate more income for the regime.

Article source:
North Korea doubles de facto sales tax levied on distributors in some areas
Mun Dong Hui
Daily NK
2019-05-03

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Possible North Korea five-year strategy document leaked, says Japanese newspaper

April 22nd, 2019

Benjamin Katzeff Silberstein

The following is interesting if true, and it makes a great deal of sense. One of North Korea’s main challenges is diversifying itself away from the overwhelming reliance on China for trade and economic ties. It’s easier said than done, though, and a wise (from a North Korean point of view) strategic ambition is one thing; realizing it is entirely different. I’ve written elsewhere about the age-old North Korean aim of diversifying itself economically away from reliance on China. Still, not much has happened since Kim Jong-il’s speech in the 1990s…

Hankyoreh’s re-write of Mainichi Shimbun:

A document titled “National Economic Development Strategy (2016–2020)” that North Korea adopted in the 2016 congress of the Workers’ Party of Korea (WPK) stated that the country needs to become less dependent on China, the Japanese press has reported.Japanese newspaper the Mainichi Shimbun reported on Apr. 21 that the strategy document set the goal of achieving an average annual economic growth rate of 8% and proposed “reducing our reliance on China and expanding foreign trade in a number of areas, including Russia, Southeast Asia, and the Middle East.”

While this strategy was adopted in the 7th WPK Congress, held in May 2016, after a hiatus of 36 years, the specific details and figures in the strategy had not been previously disclosed. The Mainichi explained that the strategy document had recently been acquired by Cho Yun-yeong, a Korean-Japanese researcher on North Korea.This document said that China represented 71.6% of North Korea’s trade value in 2014; Russia, 4.2%; and Germany, 0.8%. “China accounts for an overwhelming share of trade. We’ve been unable to move away from our dependence on China,” the document said.

The solution posited by the document was the diversification of foreign trade.More specifically, North Korea set the goal of increasing the amount of its trade with Russia to US$1 billion by 2020. According to the latest estimate by the South Korean government, North Korea’s trade with Russia amounted to US$77.84 million in 2017. In other words, the North was seeking to increase its trade with Russia more than tenfold in the space of just four years.The Mainichi Shimbun also said the North Korean document proposed gaining funds needed for building hydroelectric plants from Russia, as well as technical cooperation for upgrading facilities such as the Kim Chaek Iron and Steel Complex and the Musan Iron Mine.

North Korea also appears to have drawn up a plan to attract investment from Russian companies in international tourism zones in Wonsan and Mt. Kumgang and an economic development zone in Chongjin, along the the East Sea, in order to “build a cooperative network for producing medical products on consignment, processing marine products and developing natural energy.”The Japanese newspaper predicted that economic cooperation between the two countries could be on the agenda of the summit between North Korean leader Kim Jong-un and Russian President Vladimir Putin, which is likely to be held in Vladivostok on Apr. 24. But given the failure of the second North Korea-US summit, in Hanoi, to live up to its expectations, it won’t be easy for the North to massively boost its trade with Russia, as it hopes to do.

Full article:

N. Korean document reveals strategy to decrease reliance on China, Japanese press reports
Cho Ki-weon
Hankyoreh
2019-04-22

And here’s the original article:

Documents obtained by a South Korean researcher have shed light on the full breadth of North Korea’s top-secret state economic development strategy for 2016 to 2020, including an 8% economic growth target and strengthened ties with Russia and other countries to break dependence on China.

The 157 pages of strategy documents, along with a Jan. 21 paper titled “Cabinet decision No. 2,” which presents North Korea’s agenda for this year, were obtained by Cho Yun-yong, a researcher on North Korea who formerly served as a Tokyo correspondent for South Korean news agency Newsis.

According to the documents, Pyongyang aims to achieve 8% annual economic growth through technological development and trade diversification. While the state economic development strategy had been presented at the seventh convention of the Workers’ Party of Korea in May 2016, its details and numerical targets were not publicly released.

The objectives outlined in the documents likely provided motivation for Pyongyang’s strong demand that economic sanctions on the country be lifted during a February summit between North Korean leader Kim Jong Un and U.S. President Donald Trump. They also likely played a part in the planned summit between Kim and Russian President Vladimir Putin later this month.

With regard to the current status of the North Korean economy, the strategy documents point to low output levels of electricity and coal and the failure to fulfill domestic demand for food supply and daily necessities. As measures to realize the economic development strategy, the documents cite technological development, trade diversification and the full introduction of a new economic management method, which implies de-facto economic reform.

Specifically, the strategy calls for a break from the North’s exclusive devotion to China and expansion of trade to Russia and other countries in Southeast Asia and the Middle East. In particular, the initiative aims to boost the amount of trade with Russia to 1 billion dollars (about 110 billion yen) by 2020. The figure is more than 10 times the North Korea-Russia trade value of 77.84 million dollars in 2017, as reported in South Korean statistics.

The five-year strategic plan also suggests having Russia provide North Korea with the funds necessary to build hydroelectric plants and other facilities, as well as technological cooperation for revamping the Kim Chaek Iron and Steel Complex and the Musan Mine.

Furthermore, the economic strategy proposes inviting investment from Russian companies for special economic zones along the Sea of Japan. These proposals may become topics for discussion at the upcoming summit between Kim Jong Un and Russian President Putin.

Article source:
Docs shed light on scope of N. Korean development strategy through 2020
Koichi Yonemura
Mainichi Shimbun
2019-04-20

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Development in Sinuiju

April 22nd, 2019

Benjamin Katzeff Silberstein

NK News has a nice photo series out showing some interesting sights from Sinuiju. I’m not posting it here since it’s for their subscribers only, but Colin Zwirko’s description summarizes the general impression:

The ports along the northern coast lining the Yalu River (or Amnok River as it is called in North Korea) serve an important economic role for the city’s dozens of factories, while a large number of trucks still pour into the city daily through the cross-border bridge.

But despite the economic changes seen in the electric bicycles prominent on city streets and the ever-growing mobile phone use, infrastructure in Sinuiju is still in disrepair, ports are outdated and in need of upgrades, and even the large construction projects sometimes appear to be of questionable quality.

These issues may yet be addressed, however, as Kim Jong Un laid out grand plans for the city during a visit last November.

The photos below feature the streets and ports of Sinuiju, the city’s outskirts, and even some of the North’s own influence across the border in Dandong, all of which offer the image of a city which, while changing in subtle ways, still lags far behind its Chinese neighbor.

Check it out here.

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Why the market and state sectors cannot be fully separated in North Korea (and what it tells us about price stability)

April 19th, 2019

Anecdotal but highly valuable observations from inside North Korea suggest that the market economy is taking a hit from the overall decrease in economic activity in the state sector. None of this is surprising, and it makes perfect sense. As workers at factories and state enterprises either get paid less or not at all, their purchasing power drops. Fewer people can spend less money on the markets, leading to an overall depression of economic activity. Reports Daily NK:

Following news that most state-run factories in Pyongyang and other major cities have suspended operations, North Korean sources report that the number of merchants in some areas of the country have fallen drastically. This situation is reportedly due to decreased purchasing power among ordinary North Koreans on the back of the country’s economic stagnation.

“Before international sanctions, there were around 1,000 to 2,000 merchants, including those selling their wares outside the market, but now I only see around 100,” a South Pyongan Province-based source told the Daily NK on April 10. “Even those remaining merchants are just barely holding on. Some of them went to other places to do business but had to return because their efforts met with no success.”

“Only half of the market officials that once collected market fees are visible now,” said the source. “The officials face physical harm by the merchants when they try to collect the fees, so they avoid being out in the open.”

The source also reported that “Merchants have to sell 15 kilograms or more of food per day to pay the market fees. They aren’t selling even one kilogram a day” and that “Merchants are asking themselves rhetorically whether they’re just selling wares at the market to pay the fees.”

An investigation by the Daily NK has found that there has been little change to the number of active merchants in Pyongyang, Sinuiju, Hyesan, Pyongsong, Chongjin, Hamhung and other major cities. Small markets, however, appear to be facing a decrease in merchants.

The source said that economic stagnation has impacted North Korea’s poor classes, including those living in agricultural areas.

“The factories are shut down so people can’t get paid, and this means that no one is heading out to the markets,” said the source. “The international sanctions are so bad that there’s no work left. People don’t have money to buy anything.”

This all gets at a problem with analyzing North Korea’s economic situation based on price stability. Simple analysis of supply and demand holds that if overall availability of food goes down, prices go up. They haven’t in North Korea.

But what if people just don’t have money to spend on food if prices go up? Then, market suppliers couldn’t really raise prices much, because they’d already be pretty much at the highest level at which people are willing to purchase food (also known as the “reservation price”). It’s also important to remember that cash, according to a lot of anecdotal observations – and suggested by the state of the exchange rate – is generally rather scarcely available in North Korea, as the government seems to have contracted the money supply quite significantly over the past few years.

This is what I suspect is part of what’s going on the markets in North Korea, and some may have looked much too simplistically at food and currency market prices for a long time. Price stability doesn’t necessarily mean a lack of problems in the economy.

Article source here:
Drastic fall in market merchant numbers in some areas of North Korea
Mun Dong Hui
Daily NK
2019-04-18

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North Korea has skipped Kaesong liaison office meetings for eight weeks

April 18th, 2019

Benjamin Katzeff Silberstein

Reports Yonhap:

North Korea skipped a weekly meeting of the co-chiefs of an inter-Korean liaison office for the eighth straight week on Friday, deepening concerns about slumping cross-border exchanges amid stalled denuclearization negotiations between the U.S. and the North.

“North Korea informed us in advance that the North’s office head could not attend this week’s meeting,” unification ministry spokesman Lee Sang-min told a regular press briefing. “The meeting will not be held (this week), but the two Koreas continue to discuss necessary matters in a normal manner.”

When the two Koreas launched the liaison office last September in the North’s border town of Kaesong, they promised to hold a meeting of its co-heads — Vice Unification Minister Chun Hae-sung on the South side and his North Korean counterpart Jon Jong-su — every week, mostly on Fridays, to discuss cross-border issues.

The weekly meeting has not been held since before the Hanoi summit between North Korean leader Kim Jong-un and U.S. President Donald Trump, which ended without a deal due to differences over how to match Pyongyang’s denuclearization steps with Washington’s sanctions relief. It was last held on Feb. 22.

Full article:
N. Korea skips meeting of liaison office chiefs for 8 straight weeks
Yonhap News
2019-04-19

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North Korea trying to acquire South Korean seeds, RFA reports

April 15th, 2019

Benjamin Katzeff Silberstein

North Korean authorities are trying to procure higher-yield South Korean rice seeds to cope with chronic food shortages. But instead of simply asking Seoul for the seeds, which are not subject to economic sanctions, Pyongyang’s trade representatives are attempting to bring them in via China, posing difficulties with Chinese customs inspections, sources say.

“I was asked by a North Korean trade worker in China to get South Korean rice seeds, but there’s no easy way to bring seeds from Korea into China, so I am not sure what to do,” said a source in a Chinese border city.

The source said relatives living in South Korea have already procured 30 kilograms of the seeds and are ready to ship them.

“But I have to go through a very complicated process to bring the seeds here, so I am hesitant about the whole thing,” said the source, adding, “Plant seeds, especially those for agricultural products have a meticulous customs inspection that takes forever to get through.”

Other products from South Korea can be brought into China with relative ease, according to the source.

“Merchants who do the China-South Korea run by ferry can usually bring whatever they want into China but most of them avoid anything having to do with farming, because clearing customs is so difficult,” said the source.

In recent years, farming conglomerates worldwide have vigorously defended their intellectual property rights for engineered seeds. Seoul, however, doesn’t mind if merchants take the rice seeds out of the country.

“It isn’t too difficult to pass South Korean customs, but [merchants] have to report the seeds to Chinese maritime customs. Then they have to pay high tariffs and go through a strict quarantine,” the source said.

“If they try to smuggle them (into China) to avoid the hassle, they face [the possibility of] heavy fines and criminal punishment,” said the source.

“I am pretty certain that North Korean authorities are ordering their trade workers in China to find South Korean seeds. They aren’t really asking for a lot of them. I think they will conduct experiments on the seeds to see if they are suitable for North Korea’s soil and weather,” said the source.

A second source, from a Chinese border city, noted that North Korea was able to bring beech seeds from Ulleung-do, a South Korean island east of the Korean peninsula, but wondered why Pyongyang is trying to get Southern rice seeds in such a roundabout way.

“They can have these kinds of plant seeds easily if they just ask the South Korean government, especially now that North and South Korea are trying to be friendly with each other,” the source said, adding, “It is hard to understand why they are being so secretive.”

Article source:

North Korea Tries to Secretly Get South Korean Rice Seeds Using Traders in China
Joonho Kim and Jae Wan Noh
Radio Free Asia
2019-04-15

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