North Korean Economy Watch

According to the Daily NK:

Rice prices in North Korean markets have fallen dramatically after the authorities increased levels of food distribution in major urban areas like Pyongyang and Sinuiju, part of state policy of “normalizing” public distribution. Most people are undecided about the policy, but the reality is that grain has been provided by the state both last month and into this, and this is having an effect on market grain prices.

A Pyongyang source told Daily NK on the 21st, “There was five days of distribution in the first part of last month and ten days in the last part, then a further five days at the start of this month, so rice prices fell. The authorities are saying that they are going to give ten days of distribution per month until September, then normalize it completely after that.”

Ten days of distribution at North Korea’s own mandated levels means 4.5kg for workers and a further 2kg for dependent family members.

“When they first heard about [the policy of distribution normalization] they didn’t believe it, but after getting fifteen days distribution last month and another five days this, people are wondering whether this time it could be different,” the source said. “Even last month most people said ‘this will only last for this month,’ but now they have done it this month as well the number of expectant people is rising.”

The source also revealed data on the drop in market grain prices, saying that at one point the price of rice in Pyongyang had declined from 6500-7000won/kg, the approximate price point since the start of the year, to 4500won. “Although it has since climbed back up through the 5000won barrier, it is holding steady,” she added.

However, “From the middle part of April the price started slowly rising again,” she went on, conjecturing, “If distribution is achieved next month as well then it should stay below 6000won, perhaps even staying at around 4000-5000won.”

Aware that Pyongyang is a unique case in the North Korean context, Daily NK has also been checking conditions in other parts of the country, including along the Sino-North Korean border, and has learned that there has been distribution in the North Pyongan Province city of Sinuiju, the Yangkang Province city of Hyesan, and Heoiryeong and Chongjin in North Hamkyung Province, raising the possibility, which sources have echoed, that distribution is occurring nationwide. All the areas checked by Daily NK have also seen rice prices falling sharply thanks to the state distribution.

One Sinuiju-based source explained the situation there, saying, “As far as I know, the official policy of normalizing distribution is not just for our region but all other regions, too. They recently gave us ten days of rice here, so the price in the jangmadang (market) has fallen below 5000won.”

Sources report that between April 14 and 17 the price of rice has fallen to 5400won in Hyesan, 5100won in Hoiryeong, 5200won in Chongjin, and 5000won in Saebyeol County.

A source from Chongjin explained, “On or around April 10th it was selling for 4800won, but has since gone back over 5000won. They have given distribution but exchange rates are not falling, so if distribution ceases at any point, prices will have to rise again.” The same source noted, however, that in Hyesan prices fell, but when the authorities then stopped importing rice from China, they rose again, reaching 6400won. “Rumor has it that they will allow imports again,” the source noted, “but nobody knows when so prices remain high.”

Read the full story here:
Rice Prices Fall on State Distribution
Daily NK
Kim Yong Hun
2013-4-21

According to the Hankyoreh:

While North Korea prohibited members of the Corporate Association of Kaesong Industrial Complex (CAKIC) from entering the North, it granted access to representatives of the Eugene Bell Foundation. The foundation has been providing humanitarian and medical aid to North Korea for some time.

On Apr. 18, the Eugene Bell Foundation announced that a group of nine people who had been staying in Beijing waiting for their North Korean visas, including Chairman Stephen Linton and a group of donors to the foundation, finally received their visas that afternoon and boarded a plane bound for Pyongyang.

“Even this morning, it was unclear whether they would be allowed to enter the country, but fortunately the visas were issued in the afternoon,” a representative of the foundation said.

This is being seen as showing that North Korea is linking the Kaesong Industrial Complex issue with the current political situation on the Korean peninsula, but that it is willing to receive humanitarian support. Particularly noteworthy is the fact that the group visiting North Korea includes eight Americans and one French person, but no South Korean nationals.

The Eugene Bell Foundation, which operates tuberculosis clinics in eight areas in North Korea, including Pyongyang and Nampo, has sent representatives to North Korea twice each year in order to assess whether the tuberculosis medicine that it provides is being used properly. These visits continued to take place during the Lee Myung-bak administration (2008-Feb. 2013).

On Mar. 22, the foundation sent North Korea 678 million won (USD$604,267) worth of tuberculosis medicine in keeping with the principles of Park Geun-hye’s trust-building process for the Korean peninsula, which does not link humanitarian aid with the North Korean nuclear weapons issue. This medication left Pyeongtaek harbor and arrived at Nampo harbor on Apr. 4 by way of Dalian, China.

Meanwhile, the owners of the businesses at the Kaesong complex that were prohibited from entering the North on Apr. 17 have decided to try once again to visit the North on Apr. 20 via the CIQ (customs, immigration, and quarantine) office in Paju, Gyeonggi Province.

The Ministry of Unification announced on Apr. 18 that eight more employees who had been staying in Kaesong had returned to South Korea through the CIQ office. This brought the number of South Korean employees still remaining in the complex two weeks after North Korea blocked traffic from entering to 197, less than one fourth of the original total.

Read the full story here:

N. Korea allows entrance to foreign aid group
Hankyoreh
Gil Yun-hyung
2013-4-19

Institute for Far Eastern Studies (IFES)
2013-4-18

After Kim Jong Un came to power about a year ago, his main official activities reportedly were focused on the military.  The young leader is said to be looking to consolidate control over the military to strengthen the monolithic leadership system.

Recently, South Korea’s Ministry of Unification (MOU) released a report on the first anniversary of Kim Jong Un’s appointment as the first secretary of the Workers’ Party.  In the report, Kim Jong Un is reported to have made a total of 192 official activities in which 38 percent (73 activities) were focused on the military while political and economy related activities were 23 percent (45) and 20 percent (37), respectively.

Compared to Kim Jong Il’s record of 145 activities in 2011, in which military related events were 39 while economic and political and entertainment performances were 11 and 29, respectively, Kim Jong Un’s activities were focused more on the military.

In addition, a higher number of military elites were seen accompanying the state leader to these military-related events.

The report also stressed the difficulty in assuming that the North Korean economy drastically improved or deteriorated after Kim Jong Un took power.  According to FAO and WFP reports, 2012 to 2013 grain production reached 4.92 million tons, which is an increase of 10.5 percent against the previous year.

This is the third consecutive year where an increase in grain production has been reported; but North Korea still faces a deficit of 210,000 tons, as 5.43 million tons is estimated to be minimum grain requirement (according to FAO) and only 300,000 tons is expected to come in from overseas.  However, MOU authorities explain that regardless of the food supply, distribution difficulties still remain in North Korea.

The exchange rates are reported to have been continuously on the rise from last year.  As of March of this year, 1 USD exchanged for 8,000 KPW and the price of 1 kg of rice was 5,500 KPW.  Considering the average monthly salary of North Korean workers ranges between 3,000 to 4,000 KPW, the food situation for the ordinary people is suspected to still be poor.

The report also did not see any significant signs of changes in North Korean economic policy.  In North Korean leader Kim Jong Un’s New Year message, building a strong economic nation was named as the top agenda for the year, with agricultural and light industries as key sectors. However, the national budget recently released by North Korea’s Supreme People’s Assembly (SPA) revealed a decrease in the budget for agricultural and light industries while the defense budget has increased.

According to Yonhap:

The United States has virtually stopped funding anti-North Korean civic groups in South Korea due to its financial downturn, sources here said Wednesday.

Organizations such as the North Korea Intellectuals Solidarity (NKIS) and the North Korea Reform Radio said in a seminar in Seoul that Washington’s financial assistance for groups that support liberty and human rights has all but dried up this year.

“At its peak, the U.S. provided US$5 million in support annually, but the general lack of similar support from the Seoul government may have played a role in the latest cutbacks,” said NKIS executive director Kim Heung-kwang.

He also speculated that current economic troubles in the U.S. and the implementation of across-the-board budget cuts are affecting overseas financial support.

Kim Seung-chul, head of the radio station, said that his organization had relied on assistance from the National Endowment for Democracy, which is controlled by the U.S. State Department.

“With the drying up of subsidies from other U.S. sources, there is a pressing need for the Seoul government to take action,” he said.

Read the full story here:
U.S. cuts off subsidies to anti-N. Korea groups in S. Korea
Yonhap
2013-4-17

Reuters offers a cautionary tale of investing in the DPRK:

Setting up a brewery in North Korea seemed like a good idea to Harry Kim and his Chinese friends two years ago. Everyone likes beer, even in one of the world’s most closed and least understood countries, they reckoned.

Kim and his partners even got the beer flowing after workers strapped equipment onto a truck in the Chinese border town of Tumen and drove it to the North Korean coastal city of Chongjin. Chinese engineers taught the locals how to brew. City officials loved the taste, he said.

But the small Chinese-North Korean venture ran aground within months after failing to get final approval from authorities in Pyongyang.

Kim’s experience is an illustration of both the challenge and the potential of doing business in North Korea, which has grabbed global attention in recent weeks with its threats to wage nuclear war on South Korea and the United States.

“It wasn’t rejected. We just waited. The central government didn’t come and say ‘no’, but the documents were just never issued and so we eventually gave up,” said Kim, a Chinese national of Korean descent living in Tumen in China’s northeastern Jilin province.

…

There is little public information on North Korea’s beer market but one thing seems clear – demand outstrips supply.

Troy Collings, a director at Young Pioneer Tours, a travel operator based in China which takes groups into North Korea and has organised brewery visits, said there were probably less than a dozen locally made beers available in the country.

In Pyongyang, two hotels concoct their own microbrews. The Rakwon department store creates its own eponymous beer, too, he said.

“They can’t produce enough for the domestic market,” said Collings.

The opportunity was clear – and reinforced for Kim when he saw the elite in Chongjin drinking a lot of Heineken and Corona.

So, in mid-2011, Kim and two friends joined up with a North Korean businessman to put the brewery plan in motion.

Approval from Chongjin city came easily, he said. The province, North Hamgyong, gave the green light too. And the first of three investments in equipment and supplies – the initial one worth about 200,000 yuan – was made.

Since North Korea has no system of credit and the risks of investing were high, Kim and his partners tied the beer project to seafood exports.

Before each investment was made, they were allowed to buy a cargo of North Korean seafood to sell in China. The first was about 50 tonnes of squid, he said.

…

It took about nine hours to drive from Tumen to Chongjin with the brewery equipment, including stops at customs.

The equipment was installed quickly and Chinese engineers showed the North Koreans how to brew. Soon, suds were flowing. The product was dubbed Wongang, or ‘river source’, beer.

On the first day of business the investors invited senior city and provincial leaders to the brewery for a sample. All approved, Kim said.

But the new brewery could not ramp up production without authorisation from Pyongyang, which never came despite months of waiting. There was never a response and the investors never got an explanation.

“If you push too hard it could raise suspicions,” Kim said.

It was a pity, because the North Koreans were good workers, he said, citing how the investors overcame the frequent power cuts which made it hard to use a computer to monitor the brewing process.

Instead, the investors stationed North Korean workers at each of the pressure gauges on the brewing equipment in 12-hour shifts. The workers were told if the dial reached a certain level they should turn a knob to let off pressure.

“They got chairs and sat there looking at the gauges, not sleeping all night, one person at each position,” said Kim.

Thanks to the squid hedge, the Chinese investors basically broke even. Kim now runs his restaurant in the space where the brewing equipment was stored before it was hauled to Chongjin.

Some day Pyongyang may give the green light, Kim says, but he is not holding his breath.

“As I was leaving they said ‘It’s not that we don’t want to do it, and it’s not that our senior leaders or the central government don’t want to do it, but we just don’t have practical experience with this kind of thing’.”

UPDATE: Simon notes in the comments:

There are not about a dozen locally brewed beers in the DPRK, there are literally dozens, if not many more. A great many restaurants and bars brew their own beer. The number quoted in the article isn’t close to the reality that small brewing set-ups are quite widespread in Pyongyang and other cities too.

Read the full story here:
Nuclear threats to squid hedges: it’s hard to get a beer in N.Korea
Reuters
John Ruwitch
2013-4-14

A researcher for Torrenfreak has used a database system called Scaneye to track the DPRK’s use of BitTorrent (peer-to-peer file sharing). Here are his results:

One of the titles that jumps out immediately is “Net Monitor for Employees Professional,” which seamlessly fits the country’s profile. Ironically, the downloader in question did very little to cover his or her own tracks.

There are also other needs for which BitTorrent can give a helping hand, on the adult entertainment front for example. The screenshot below shows a selection of the adult clips, including the work of Japanese porn actress Marica Hase and her U.S. colleague Alice Frost.

Aside from spy tools and porn there are plenty of less controversial titles listed as well. “The Complete Home Decorating Idea Book” for example, which may have been out of stock at the local book store.

American movies and TV-shows are also hard to obtain in North Korea it seems, but the pirated editions are easily accessible online.

“The Following” for example, a TV-show about a psychotic serial killer who leads a cult of serial-killing followers. Or the horror film Death From Above, which features several pro-wrestling stars in the cast.

According to Yonhap:

According to the data compiled by the Ministry of Unification and based on information provided by foreign institutions, there were minor improvements in grain production and electricity output, but the difference was minimal and may have actually fueled inequality.

“Personally, I see almost no change from a year earlier,” said a ministry official, who did not want to be identified.

The data was released to the press to coincide with the first anniversary of the North Korean leader having assumed the country’s top job. Kim inherited the communist country after the death of his father in late 2011, but became the first secretary of the Workers’ Party of Korea on April 11 of last year.

North Korea’s food production is estimated to have increased 10.5 percent on-year to 4.92 million tons in the 2012-2013 grain year, the official said, adding that this translates into a shortage of 210,000 tons, down from 300,000 tons from the previous year.

The official, however, said foreign data is based purely on information given by Pyongyang, and is not reliable.

“There may be a need to carefully look at the data on grain,” he said, hinting at the fact that there have been numerous cases over the years where official information was not supported by facts.

On power production, the recent opening of the Huichon power station has increased output by 21.1 billion kilowatts, but the benefits are mostly being felt by the elite in Pyongyang. Outside the capital city, other regions are still affected by power shortages, he claimed.

The official added that while Kim has been calling for the bolstering of its agriculture and light industries, funds earmarked for these sectors grew at a slower pace than the overall growth of the budget.

The 2013 budget grew 5.9 percent from the year before, but funds for the light industry and farming sectors gained 5.1 percent. Defense spending on the other hand gained 16 percent on-year.

The latest data showed that consumer prices have generally been moving up since last year, potentially putting a greater burden on many people whose salaries have not changed in years, the official said.

Read the full story here:
N.K. economy remains unchanged under new leader: data
Yonhap
2013-4-12

Institute for Far Eastern Studies (IFES)
2013-4-11

Rodong Sinmun, the official newspaper of the Workers’ Party declared that North Korea has secured its position as a nuclear state, advancing the nation to concentrate on the economic construction, in an editorial last Friday.

This can be interpreted as North Korea’s intent to place more emphasis on investments towards economic development now that it has “made advancement in nuclear weapons capabilities to respond to any threats from the United States and South Korea.”

The editorial stated, “The tremendous mental and material potentials provided by the great Generalissimos Kim Il Sung and Kim Jong Il, the socialist system of Juche based on collectivism and rich experience made in the effort to build an economic power are precious assets for making a great leaping progress in economic construction.”

This is in line with last month’s plenary meeting of the WPK Central Committee that reiterated the importance of parallel policy of economic construction and nuclear power to compete against the United States.

At the meeting, parallel policy of economy and defense were acclaimed to be superior in its war deterrence and defense capabilities without increasing the defense budget to provide support for economic construction and improve the lives of the people. In addition, agricultural and light industries were named as key sectors and called for improvements in the production of everyday goods for the people and reach the grain production target for this year.

On the other hand, Finance minister Choe Kwang Jin reported at the meeting of the Supreme People’s Assembly on April 1 that 44.8 percent of the national budget was allocated for economic development and improvement of its citizen’s lives.

In addition, the news reported that 38.9 percent of the total expenditures were shifted to social cultural and people policies to implement free compulsory education, healthcare, social insurance and social security systems and secure the development of arts, literature and sports.

The minister added that the rest of the budget was allocated for national defense but no specific amount of defense budget was disclosed.

According to KCNA (2013-4-10):

A production upsurge was witnessed in various fields of the economy in the Democratic People’s Republic of Korea during the first three months this year.

The quarterly coal output quota was hit at 101 percent nationwide. Coal production increased sharply at the Kaechon, Tokchon and Kangdong area coal-mining complexes.

The Kim Chaek Iron and Steel Complex, a giant steel maker, finished the quarterly pig production plan at 105 percent.

The Taean Heavy Machine Complex, a major generator producer, topped the plan for March by 30 percent.

The same is true for other machinery makers, including Rakwon and Ryongsong Machine complexes.

A production upswing was also seen in the timber industry, with its quarterly plan topped at 100.5 percent.

In particular, forestry stations under the Jagang Provincial Forestry Management Bureau made fresh innovations in logging.

I am way behind on blog posts. Actually, I am way behind on everything at the moment. However, I wanted to take a second to point out a couple of new items that appeared on Google Earth imagery today.

We can now see the new location of the USS Pueblo:

Learn more about the Pueblo being moved here.

We can also see construction work has begun on the new shopping center and/or skate park in central Pyongyang:

Learn more about the shopping center and/or skate park construction here.