North Korean Economy Watch

According to Reuters:

The U.S. Treasury Department tightened sanctions against North Korean diplomats to the United Nations, requiring banks to get special permission before granting them accounts, the agency said in a notice posted online Tuesday.

The United States removed an exemption in the broad economic sanctions against Pyongyang that had allowed U.S. banks to service North Korean diplomats without getting specific permission from the Treasury Department Office of Foreign Assets Control (OFAC).

Banks will now have to obtain a special license from OFAC before opening bank accounts, processing transactions or extending credit for North Korean diplomats or their family members, OFAC said. North Korea’s U.N. mission did not immediately respond to a request for comment.

U.S. officials have long said North Korea uses the bank accounts of diplomats to help Pyongyang conduct business around the world, despite economic sanctions.

A U.S. intelligence official, speaking on condition of anonymity, said North Korea “seeks to alleviate its economic isolation” by bringing back currency from overseas “using all available avenues.”

For example, said another U.S. intelligence official, North Korea sells cigarettes and illegal drugs outside the country and use diplomatic packages to send the cash back home.

Washington has been ramping up economic sanctions against Pyongyang since a nuclear test and rocket launch this year, seen as provocations by the United States and its allies.

Under new U.N. sanctions adopted last month in response to North Korea’s fifth and largest nuclear test in September, countries are required to limit the number of bank accounts to one per North Korean diplomatic mission and one per diplomat.

Here is the official statement from OFAC:

Publication of Updated North Korea-related General License
12/20/2016

The Office of Foreign Assets Control (OFAC) has amended General License 1 pursuant to E.O. 13722 of March 15, 2016, “Blocking Property of the Government of North Korea and the Workers’ Party of Korea, and Prohibiting Certain Transactions With Respect to North Korea.” General License 1-A no longer authorizes U.S. financial institutions to open and operate accounts for the diplomatic mission of North Korea and its employees and their families. It now requires that funds transfers to or from the mission or its employees be conducted through an account at a U.S. financial institution that has been specifically licensed by OFAC.

I am generally behind on blog posts this year and plan to catch up, including coverage of sanctions, in the next.

The Reuters story can be found here:
U.S. tightens sanctions against North Korea’s U.N. diplomats
Joel Schectman; Additional reporting by Michelle Nichols in New York
Reuters
2016-12-20

By Benjamin Katzeff Silberstein

This November, just like every  time that new sanctions are levelled on North Korea, the first question tends to be: what will China do? Unsurprisingly, the same question followed after UN resolution 2270 in March this year, when the international community adopted the strongest sanctions against North Korea to date, most crucially targeting its minerals exports. This time, some believed, would be different. China was finally fed up and would take measures to hit North Korea’s economy, and official; statements and some bureaucratic action reinforced this impression. Now, some hope that the “cap” measure on imports of North Korean coal will remove the loophole created by the “humanitarian exemption” in the previous sanctions.

By now, after the THAAD, other geopolitical developments and the sheer passing of time, the question of China’s degree of sanctions enforcement has almost faded into the background. As the Washington Post’s Anna Fifield showed in a dispatch from Dandong a few weeks ago, sanctions are at most one factor among many that impact trade between China and North Korea.

This summer, I visited Dandong, Yanji and Hunchun, three Chinese cities along the border. I got a very similar impression: sure, some people involved in border trade told me, things had gotten a little more complicated, though not much. But sanctions were rarely mentioned as the reason for any added difficulties or downturns in trade.  At the time, China’s enforcement of sanctions was very much a topic of debate, and most analysts were skeptical of any squeezing going on, while some claimed trade had virtually ceased. At my visit, on the contrary, I saw fairly vigorous trading activity, and few people I spoke to thought any changes had occurred since sanctions were enacted. Posting these impressions and pictures has been a project in the pipeline for a while, so while much has happened since this summer regarding China-DPRK relations and trade, I hope that the reader will find it interesting to see how things looked at a time when some concluded that China was finally squeezing North Korea in a way that hurt. To be clear: all impressions and pictures below are from late June of 2016.

Trailing the China-DPRK border, in search of sanctions

Dandong 

Entrance to the Dandong customs inspections area. Photo: Benjamin Katzeff Silberstein

Earlier this year, the UN Security Council adopted the strongest sanctions that North Korea has faced to date. As with previous rounds of sanctions, one of the major questions is China’s degree of enforcement. Going back a few months, some suggested that major shifts had taken place, and that trade between North Korea and China had declined radically.

By the actual border, this summer, things looked very different. In contrast to the image of a desolated trading environment, I encountered bustling traffic during a visit earlier in the summer. During one morning in late June, around 85 trucks crossed the border from North Korea into China in only about one and a half hours. Virtually all trucks were registered to northern Pyongan province, the home province of Sinuiju. In addition, 19 cars and buses, one long freight train and one passenger train crossed the bridge during the same time. After this first stint of traffic, the flow reversed and a steady flow of trucks began pouring into North Korea from China. Only during the 15 minutes when I observed the traffic going from China, into North Korea, 35 trucks and 13 buses and cars crossed the bridge.

The traffic flowed in sequences, one direction at a time. And this was only the morning traffic. The flow may have continued throughout the day, as the traffic moved in intervals. Walking back to the customs area from the bridge crossing in the early afternoon, what was previously a calm intersection by Chinese inner-city standards had turned busy: trucks lined the entire street leading up to the customs office and some flowed over into the adjacent street, waiting to drive into the inspection area. All in all, more than 80 trucks lined the roads waiting to cross into North Korea. Most carried Chinese license plates.

Trucks lined up on both sides of the street at one of the main intersections in central Dandong, waiting to go into the customs inspection area to cross into North Korea. Photo: Benjamin Katzeff Silberstein

Trucks, trucks and more trucks. Photo: Benjamin Katzeff Silberstein

Trucks lined up for customs inspection along the streets of Dandong before crossing into North Korea. Photo: Benjamin Katzeff Silberstein

Trucks lining up for customs inspection before crossing into North Korea from Dandong. Photo: Benjamin Katzeff Silberstein

The never-ending line of trucks. Photo: Benjamin Katzeff Silberstein

Truck driving into the Dandong customs area. Photo: Benjamin Katzeff Silberstein

Another picture of the never-ending line of trucks. Photo: Benjamin Katzeff Silberstein

North Korean trucks crossing into Dandong from Sinuiju. Photo: Benjamin Katzeff Silberstein

It is commonly estimated that around 200 trucks go between China and North Korea on a regular day. In sheer numbers, virtually nothing seemed to have changed regarding the traffic since the latest round of sanctions. Only the trucks observed in plain sight during this morning amount to a little under 200, and this merely during the first few hours of the day. At least 10–20, probably far more, were already in the customs inspection area waiting to cross. In short, things looked very regular and busy.

Trucks waiting to cross from North Korea into Dandong. Photo: Benjamin Katzeff Silberstein

Some of the trucks going into Dandong from Sinuiju looked empty. Photo: Benjamin Katzeff Silberstein

Of course, one must be careful not to draw too drastic conclusions from one day of observations. Things may have changed throughout the summer and surely during the fall, and channels such as ship transports are not visible from the border bridge area. Moreover, according to reports from inside North Korea, the authorities have expressed concerns about potentially shrinking trade volumes as a result of sanctions, and some traders now smuggle goods that are covered by the sanctions rather than transporting them openly, as they have in the past, according to Daily NK. In short, sanctions did appear to be having some degree of impact, even during the past summer.

Most North Korean trucks crossing into Dandong were registered to North Pyongan province ( 평안북도도, here abbreviated to 평북), the province bordering Dandong. Photo: Benjamin Katzeff Silberstein

Another truck registered to North Pyongan province. Photo: Benjamin Katzeff Silberstein

However, the truck traffic across the Chinese border through Dandong suggested that the picture was mixed. At the very least, observations from the border area showed that even though trade in certain goods may have gotten more difficult, North Korea was by no means economically cut off from China, and still is not. Prices for food and foreign currency on North Korean markets, too, remained relatively stable through the summer from when sanctions were put in place, indicating that the economy as a whole is not feeling any drastic impact of the sanctions.

Factory materials going into North Korea from China. Photo: Benjamin Katzeff Silberstein

Factory materials going into North Korea from China. Photo: Benjamin Katzeff Silberstein

Most trucks transporting factory materials into North Korea appeared to be Chinese-registered. Photo: Benjamin Katzeff Silberstein

Another Chinese truck transporting factory materials into North Korea. Photo: Benjamin Katzeff Silberstein

If the North Korean economic elite was worried about the sanctions, it certainly did not show at one hotel in central Dandong. Sinuiju in North Korea is only a few minutes drive over the Yalu River, on the bridge connecting the two countries. The hotel was packed with North Korean guests, many of whom have presumably come over for purchasing and meetings with Chinese business partners. They came and went in a steady stream, wearing luxury brand clothing, watches and carrying expensive bags and wallets.

They paid everything in cash, and at least one person per travel party spoke Chinese. One man held a car key with a logo from KIA, the South Korean car manufacturer. One woman sported a Hello Kitty handbag. As some got ready to depart, bags piled up in the lobby, seemingly filled with goods from shopping sprees around town. Some of it seemed to be meant for re-sale in North Korea. Many stores around the flood banks cater specifically to a North Korean clientele, and sell items like kitchenware that are not easily accessible across the river.

Many stores in Dandong cater specifically to North Korean consumers. The sign at the left bottom of the picture reads “조선백화점,” translating into “Korea department store.” Photo: Benjamin Katzeff Silberstein

Travelling to Dandong, it was particularly apparent why the Chinese government would be reluctant to clamp down too hard on border traffic, even if it would want to do so. Political reasons aside, trade between North Korea and China matters for cities such as Dandong. One can see it in the flesh: the streets are packed with companies dealing in imports and exports to and from North Korea. One company trades steel; another sells construction equipment such as tractors. Several sell cars and buses, and others deal in refrigerators, dishwashers, washers and dryers. One, called “Pyongyang Tongshin (평양통신),” judging by its name, offers cell phone services for traders travelling into North Korea. Should trade between the two countries drastically dive, the local economy would take a hit.

Advertisements for North Korean cell phone service Koryolink in Dandong. Photo: Benjamin Katzeff Silberstein

“Pyongyang Communications.” Sign in Dandong. Photo: Benjamin Katzeff Silberstein

One could turn these observations on their head: if so many trucks were lining up and only moving slowly into the customs area, could that not mean that inspections had gotten tighter? Was the line of trucks actually a sign that Chinese authorities did what they have promised to do?

Perhaps. But not according to people around the border crossing and customs area. I asked several individuals involved in the cross-border trade about the long lines and waiting times for border crossings. No one seemed to believe that the traffic commotion and lines were anything out of the ordinary. Both Chinese and North Koreans involved in import-export business said traffic had not changed at all during the past year or so. Overall trade had declined a bit, one person said. The trucks carried a little less than they did before, but only marginally. Coal was not traded as frequently as it was before the sanctions were put in place.

This sign lists services for one Dandong firm that offers, among other things, UPS transport services and solar-powered appliances, which have become popular in North Korea in recent years. Photo: Benjamin Katzeff Silberstein

But the timing of the early 2016 round of sanctions made such statements difficult to assess. China had in fact been decreasing its coal imports from North Korea at different points in time several years before the latest round of sanctions. Between 2013 and 2015, for example, the value of Chinese coal imports from North Korea shrank by almost 25 percent. Only between January and February 2014, the value of trade between the countries dropped by 46 percent. The statistics are often clouded by the fact that global market prices for commodities such as coal fluctuate heavily. There may also be a variety of seasonal factors at play. In sum, isolating sanctions as a variable is notoriously difficult, and often, numbers do not tell the full story. As of June this year, North Korean coal could still be ordered through the Chinese online shopping mall Alibaba.

Moreover, even if Chinese authorities wanted to check all goods cross with minute rigidity, one can question whether it would even be practically feasible. The customs area is not particularly large and did not appear to be overflowing with staff. Checking around 200 trucks per day for their exact goods, and determining whether its revenues could be used to fund North Korea’s weapons program – the condition stated by the latest sanctions – seems like a gargantuan task in practice.

Hunchun

Tourists and a truck waiting by the Hunchun-Rason border crossing (Quanhae). Photo: Benjamin Katzeff Silberstein

The Dandong-Sinuiju is the main point of trade between China and North Korea, but not the only one. An one-hour drive from the Chinese city of Hunchun, trucks and people come and go to and from the North Korean northeast. At the border crossing, most seem to be going to the special economic zone in Rajin in North Korea. On one gloomy Thursday in late June, around 40 Chinese trucks waited to cross. One Chinese-Korean waiting for the gates to open to the customs area told the present author that business is going very well these days. He runs a hotel in Rajin, catering mostly to Chinese tourists and business people. He has seen no dip in customers over the past year – rather, more people are coming than before. This single testimony may not be fully indicative of trade as a whole, but it does suggest that Chinese tourism remains an important and fairly viable source of revenue for North Korean businesses in Rason.

The Quanhae border crossing from afar. Photo: Benjamin Katzeff Silberstein

Trucks lining up to go into North Korea. Photo: Benjamin Katzeff Silberstein

More trucks at Quanhae. Photo: Benjamin Katzeff Silberstein

Trucks at the border crossing. Photo: Benjamin Katzeff Silberstein

Chinese tourists lining up to have their passports checked before heading into Rason. Photo: Benjamin Katzeff Silberstein

This was certainly the way things looked at the border crossing. Chinese tourists came and went in great numbers, many carrying North Korean shopping bags. Trucks, too, continuously crossed the border throughout the afternoon. All in all, 80­­–100 trucks drove into North Korea during this afternoon. One was adorned with a logo from the Dutch shipping company Maersk. A few trucks came out of North Korea as well, many seeming to carry seafood destined for cities such as Hunchun and Yanji.

A truck adorning a logo from the Dutch shipping company Maersk having just crossed into North Korea from Hunchun. Photo: Benjamin Katzeff Silberstein

In addition, a large number of buses and minivans carrying tourists and traders went in from China. Many minivans carried driving permits for Rajin clearly visible through their front windows. Given the amount of truck traffic only during the afternoon, it seems a reasonable estimate that perhaps twice the amount of traffic went through during the day as a whole. One person with good knowledge of the border area estimated that around 200 trucks go through at this crossing on a regular day, though this figure is obviously neither exact nor certain.

Customs office on the North Korean side of the border crossing. Photo: Benjamin Katzeff Silberstein

Chinese tourists waiting to head into North Korea. Photo: Benjamin Katzeff Silberstein

The two bridges connecting Rason to China (particularly the newly constructed one in the back). Photo: Benjamin Katzeff Silberstein

These observations did not fully prove that China was not enforcing sanctions on North Korea during the summer of 2016. However, they did show that trade and traffic between the countries was still very much alive. Some goods may have be traded less, but neither sanctions nor souring relations between North Korea and China seemed to have reduced trade as much as some observers have claimed. The North Korean economy may be impacted by sanctions, but it is not and rarely has been fully isolated from the rest of the world.

As the five year anniversary of the death of Kim Jong-il arrives, the DPRK has taken to placing lauding articles of the former leader in affordable and cooperative news outlets across the world.

A reader in Kuwait sent along the story from the December 15, 2016 issue:

This is nothing new historically. The DPRK has been doing this for decades. This is, however, the most recent example of which I am aware.

Other stories about Kuwait here.

Various overseas groups of Koreans are visiting the DPRK to mark the fifth anniversary of the death of Kim Jong-il. Most of them are mentioned fairly regularly in the official media, but a couple of the business groups were new to me. According to Rodong Sinmun (2016-12-19):

Delegation of Korean Business Persons in China Arrives

A delegation of the Association of Korean Business Persons in China led by Chairman Phyo Song Ryong arrived here Friday to commemorate the fifth anniversary of demise of leader Kim Jong Il.

Earlier, arriving was a delegation of the Association for Economic and Cultural Exchange of Korean Nationality in Dandong City of China headed by Chairman Kim Thaek Ryong.

UPDATE: They reportedly left on 2016-12-21.

Here is a link to a PDF of the original article.

If anyone knows anything about these groups (Chinese names, affiliated businesses, etc) please let me know.

Simon Cockerell of Koryo Tours has posted images of a new prepay card offered by Daesong Bank (대성은행/Taesong Bank) called “Kumgil” (금길) or “Gold Road”:

The front of the card contains the brand name, logo (a diamond?), sponsoring bank name, and the phrase “electronic payment card”. I spoke with James Pearson at Reuters about the 16 digit number, and based on his research it does not appear to be directly related to the Foreign Trade Bank (FTB). Mr. Cockerell reports on his Instagram page that the card uses the same retail payment equipment as the Narae Card (which is controlled by the FTB), so that means the two banks (Daesong and FTB) have an established clearing mechanism to settle electronic balances (Q: Are other NK banks using this same equipment/part of the same network?). FTB is supposedly the official repository of the state’s hard currency reserves for the purposes of managing foreign trade and domestic hard currency transactions for imported goods, though it apparently does not have a monopoly on individual/company hard currency accounts. Daesong Bank (Taesong) is has been linked to the KWP’s Office 39.

The back of the card reads:

주의사항 (Caution)
1. 카드앞면의 전자요소가 손상되지 않도록 주의하여주십시오.
Be careful not to damage the chip on the front of the card
2. 암호를 련속 3번 틀리게 입력하면 카드의 사용이 중지됩니다.
The card will stop working if you enter the wrong password 3 times.
3. 카드를 분실한 경우에는 즉시 카드발급지점에 알려주십시오.
If you lose the card, immediately notify the branch that issued the card.
4. 기타 제기되는 문제들은 카드발급지점에 문의하여주십시오.
For any other issue, consult the branch that issued the card.

This card is apparently for hard currency purchases only, and it was launched in early 2016. It is functionally the same as the Golden Triangle Bank Electronic Payment Card, Jonsong Electronic Payment Card, KoryoBank Electronic Payment Card, Narae Electronic Payment Card, Ryugyong Commercial Bank Electronic Payment Card, and Sowol Electronic Payment Card.

I should also mention that none of these are “debit cards” since they are not linked with a specific checking (demand) deposit. These are pre-pay cards only. These cards are essentially private digital currency issued by an established bank. The bank maintains control of the hard currency used to top off the cards, which it uses to generate income (float), while the card holder gains the convenience of not having to carry cash, which does offer some security from petty crime, but makes retail transactions more observable to security agencies.

Mr. Cockerell also posted the picture of a loyalty card for the Moran Shop (“Bar”):

He reports that “every time you spend money there it’s recorded on the card and when you reach $500 equivalent in total then there’s some free gift.”

I have written about some other loyalty programs here and here.

In this Google Earth image, we can see a new Kim Jong-un/executive runway being installed in Unsan County (은산군) Between the Sunchon Cement Factory and a large industrial construction site just south of the runway.

The new runway is approximately 870 meters and is intended for small Cessna-style aircraft–similar to other runways constructed throughout the country intended for the leader. It appears the runway construction is being carried out in coordination with the new industrial construction site taking place just to the south of it.

The new large construction site itself is over 1.5km in length, but its purpose remains a mystery. Like many projects, it has not been mentioned in the official media. If any readers have any ideas what any of the building foundation imprints could be for, please let me know.

I have already talked about this with Radio Free Asia.

Institute for Far Eastern Studies (IFES)
2016-12-15

The Korean Central News Agency (KCNA), North Korea’s official wire service, reported on December 3 that tens of thousands of new houses had been built this year. The KCNA report stated that six counties/cities in areas damaged by floods in North Hamgyong Province had seen 19,000 new apartments constructed with families then moving in.

In imitation of the city of Kimchaek, hundreds of housing units have been built in Puryong and Hwadae counties, while hundreds more were constructed in Kangryong county, and 200 multistory houses in Paechon county. Eighty (80) apartments were built at Ryongjon Fruit Farm in Pukchon county, 150 at Chawi Cooperative Farm, and 200 at Sujin, Uiju County.

With flood damage in late August, the Party central committee announced on September 10 that the ‘200 day speed battle’s goal’ would be to restore damaged areas, and reconstruction of housing in those areas finished on November 11. People have now begun moving in.

Unlike on Ryomyong Street in Pyongyang — extolled as a personal achievement of Kim Jong Un — construction outside the capital is said to not be progressing properly. Housing construction in Yokjon, Hoeryong, North Hamgyong that began in 2010, as part of a campaign celebrating the personality cult of Kim Jong Suk (the wife of Kim Il Sung), has yet to be completed. There is talk that completion is slated for 2017, but people living there do not believe that will happen.

However, sources indicate that the North Korean authorities have invited individuals to get involved in construction, and thus the project in Hoeryong has resumed. It seems that because construction was part of the campaign to build the personality cult of Kim Jong Suk, there was a fear that stopping the construction would badly influence internal unity.

With the state lacking funds but deeming the continuation of the construction necessary, individuals were eventually allowed to take over. Apparently investors were induced by promises that they would get 50 percent of the proceeds generated from the new housing stock.

Sources say that construction began again in March, and construction materials continue to be brought in. Individual investors have hired workers separately and are managing on-site operations.

UPDATE 2 (2016-12-12): Kim Jong-un visited the nearby training grounds of “Special Operation Battalion of KPA Unit 525,” the unit that carried out the assault on the replica Blue House, on November 4 of this year. Here is the model of the actual Blue House at the training grounds:

Although Kim Jong-un visited this location in early November, these images were apparently not published until after the combat drill was officially announced on December 11. No doubt they would have given away the secret if they had been.

The model has a few discrepancies when compared with satellite imagery, but is a fairly accurate representation of the actual Blue House and its surroundings.

One soldier was also looking at this satellite image on a computer:

The caption reads (roughly): “View of US-ROK Combined Forces Command basic command post. [UPDATE] In the comments section, James Pearson at Reuters has identified this as the Yongsan Garrison ( 37.536828°, 126.983589°) in Seoul:

UPDATE 1 (2016-12-11): The North Koreans finally got around to destroying the Blue House replica. According to Rodong Sinmun (2016-12-11), Kim Jong-un watched a combat drill of Special Operation Battalion of KPA Unit 525 on the outskirts of Pyongyang:

Kim Jong-un appeared happy with the test:

Here is the Google Earth image of the replica:

Here is the video.

So why stage this combat drill now? Inter-Korean politics? UN Security Council meeting on NK human rights?

ORIGINAL POST (2016-4-27):

Pictured above: (Top) South Korean military image of the replica blue house built in North Korea (Bottom) A Google Earth satellite image of the Blue House in Seoul.

The South Korean military is reporting that the North Koreans have built a replica of the Blue House in “Dewonri/Daiwonri”. According to the Japan Times:

North Korea is preparing to blow apart a replica of South Korea’s presidential Blue House on an artillery range outside Pyongyang, in an apparent propaganda exercise, the South’s military said Wednesday.

An official with the Joint Chiefs of Staff in Seoul said the North’s military had been detected building the half-sized replica at the Daiwonri range near the capital earlier this month.

“The North is apparently preparing to showcase a mock attack on the Blue House using the replica as a target,” the official said.

Around 30 artillery pieces, hidden under coverings, have been brought to the range.

“The exercise is believed to be aimed at stirring up hostility against the South, summoning up loyalty (to leader Kim Jong Un) and fueling security concerns in the South,” the official said.

I refer to this area as the “Taewon-ri (대원리) Artillery Range”, and I have previously written about it at NK News here. The Americans call the location “Sungho Dong Military Training Area”.

The South Korean military also released a second photo:

By Benjamin Katzeff Silberstein

The other day, South Korean think-tank KINU (Korean Institute for National Unification) reportedly claimed that North Korea has 404 official markets in total. As Curtis Melvin has already pointed out on twitter, the real number is actually higher, but all this depends on what precise definition you use of markets (institutionalized and government recognized, versus operating in a legal gray zone, et cetera). As this report by the U.S.-Korea Institute laid out last year – also using satellite imagery, like the KINU report does – markets have grown significantly in size since the early 2000s.

The more interesting figures, in my opinion, are KINU’s estimates for what the markets actually generate in terms of income for the government, and how many people they employ. Below, I place these figures in a comparative perspective within the economy as a whole, and discuss the proportional weight of the markets in the North Korean economy. But first, some of the usual caveats:

As with any figures relating to the North Korean economy, a great deal of caution must be exercised in approaching these numbers. It would seem nearly impossible, for example, to accurately calculate the number of people employed by the markets. In theory, this should not be that hard. Using Google Earth, you can measure, with a fair degree of accuracy, the size of the trading grounds, and knowing the rough size of the average market stall in a North Korean market and how many people work in each one, getting a rough number for the amount that they employ should not be impossible. It would be a very rough estimate but arguably that is better than nothing. But in practice, it would still not give the full story of how many people work in the markets, since many people work there part-time, at least according to (possibly outdated) anecdotal evidence.

Moreover, it is important to remember that the market system is not the entire private sector – many other types of exchanges and transactions go on in the North Korean economy, not all recognizable from above, in complexes such as residential buildings and the like, where small business have been known to operate from. So any number for government revenues, it is important to bear in mind, will only be an estimate (again, a very rough one) for the specific type of markets that KINU has recorded. KINU does not seem to have made its report available online yet – perhaps their methodology is laid out clearly enough to answer some of these questions.

What do the numbers tell us?

Still, the numbers are interesting as starting points for a broader analysis of the proportions and size of the North Korean economy. Starting with the number of individuals employed within the market system, KINU puts the number at 1.1 million. This is about 1/25 of the entire population of the country, as derived from the 2008 census. Table 34 (page 187 and onward) gives the total working-age population as approximately 17.37 million. Subtracting the share of the population listed as “studying,” we get around 16.4 million. Further subtracting the share of the population listed as “retired,” which arguably we shouldn’t do since elderly North Koreans are known to be significantly involved in market activities, we get approximately 13.3 million individuals. I do not subtract the share listed as “doing housework” simply because it seems far too unlikely that such a category in North Korea would really be excluded from the market labor force.

Just assuming as a theoretical experiment that KINU’s figures and the census numbers are accurate, we get a 7.5 percent share of people employed in the official market sector. In reality, the share may well lower since many people in the demographic groups subtracted are known to be involved in market activities. Conversely, it may be higher if KINU’s number does not take part-time workers into account or otherwise underestimates the number of market workers. Wheher or not one thinks this to be a high or low number is a matter of perspective. For comparison, the share of the labor force employed in retail trade in the United States was 10.2 in 2014.

Another interesting figure KINU gives is that for government revenue from the markets. Again, this, too, should not be hard to estimate in theory: if you approximate the amount of market stalls through satellite imagery and multiply the amount by the fee paid by each trader to the government, it shouldn’t be impossible to get a rough estimate for how much the trade brings the government. But of course, here, too, complications abound: when looking at markets from above, it is nearly impossible to determine exactly how large the actual trading grounds are, for example, and how much is made up of administrative and storage facilities. Still, an approximate estimate is immensely valuable as a starting point for a broader debate.

According to KINU, the North Korean government collects between $13 and $17 million per day in fees from market traders. Ever since 2003, the North Korean market regime has become increasingly formalized and incorporated into the official economy. This trend has reportedly continued under Kim Jong-un as well, and arguably accelerated during his tenure. This is clearly a wise move from a policy perspective: the government needs the markets and it needs the revenue, and their depiction as a threat to the regime may not be the full story.

Using the low number of $13 million gives us a figure of $4.7 billion in revenue per year, while the higher figure of $17 million gives $6.2 billion per year. Both the low- and the high-end estimates would put government revenues from market fees at a significantly higher figure than, for example, North Korea’s trade with China. In 2015, for example, North Korea’s exports to China estimated a total of $2.95 billion. The latest sanctions additions are estimated to take off around $700 million from North Korea’s export incomes. It is important to remember that even if they were to accomplish that, which remains doubtful, North Korea still has a domestic economy that matters greatly too. And remember – these are only estimated (estimated!) figures for government revenue from a specific type of market. They do not represent the entire private sector in North Korea.

So, while the role of exports should not be underestimated, it is important to remember that North Korea has a domestic economy of considerable size. Perhaps whatever pressure the sanctions applies on the North Korean economy could serve as an argument for those in the policy bureaucracy pushing for economic reforms that could further let the private economy develop.

Benjamin Katzeff Silberstein 

As reported by Yonhap here (I will try to find a link to the full report as soon as it is up):

North Korea currently has 404 official markets which employ some 1.1 million people, a local think tank said Friday.

The Korea Institute for National Unification (KINU) came up with the figures based on an analysis of the North Korean markets using Google Earth and a survey of North Korean defectors. The total does not include unauthorized markets.

Google Earth is a Google application that lets the user look at any corner of the earth as if viewed from a satellite.

The average number of customers reaches 57,000 per market. Nine markets are larger than South Korea’s famous 14,437-square-meter Dongdaemun Market in terms of their respective size, according to a KINU report.

The institute estimated North Korea collects US$13-17 million a day in usage fees from merchants selling goods at the markets. The communist state has received the fees since it gave an official permit to the markets in 2003, it said.

The communist state also has many temporary markets that have not gotten official authorization from the state, known as “Jangmadang.” These markets are set up in vacant fields where local merchants gather to sell and trade goods.

Full article:

N. Korea operates 404 official markets: report
Yonhap News
2016-12-10