Archive for March, 2023

As Chinese ambassador arrives, is North Korea opening up?

Thursday, March 30th, 2023

By: Benjamin Katzeff Silberstein

After a very long hiatus over the pandemic, China’s new ambassador to North Korea has taken up his post in Pyongyang, AP reports:

Wang Yajun will help in the development of the traditional friendship between the “close neighbors sharing mountains and rivers,” Foreign Ministry spokesperson Mao Ning said at a daily briefing.

China is North Korea’s main source of economic aid and political support, but interactions have been disrupted by travel restrictions imposed in an attempt to prevent the spread of COVID-19.

The ambassador’s posting comes as North Korean state media reported that leader Kim Jong Un urged his nuclear scientists to increase production of weapons-grade material to make bombs to put on the country’s widening range of weapons.

The report Tuesday followed a series of missile launches — seven this month alone — and rising threats to use the weapons against North Korea’s enemies.

(Full article here.)

Does this signal a broader relaxation in North Korea’s border restrictions, brightening prospects for trade to open up more broadly as well? Maybe. After all, there’s been signs for many months (well over a year), from infrastructure construction to (fairly tangible) rumors reported from the border area. And imports have increased, particularly of food, resulting in prices stabilizing somewhat.

At the same time, there are good reasons to doubt it. Welcoming back a Chinese envoy is, after all, a decision more in the realm of foreign policy and diplomacy than economics and pandemic prevention. Thus far there have been no reports in outlets such as Daily NK or Rimjingang suggesting a major reversal in trade policy is imminent. To the contrary, the bigger pattern seems to be the state centralizing control over trade while keeping it at a very small minimum. Whatever trade regime emerges from this, it may not look like the old one.

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Corn prices continue to rise in North Korea in early March, suggesting tightening food supply

Friday, March 10th, 2023

By: Benjamin Katzeff Silberstein

A few updates on the food situation:

Overall, prices continue to rise, as reported by several outlets. A recent article in Rimjingang reports that fuel prices are in fact double what they were last year this time. Fuel prices are highly sensitive to import conditions, suggesting that getting fuel and oil into North Korea remains relatively difficult:

The international price of fuel rose steadily worldwide due to Russia’s invasion of Ukraine in February 2022; however, it began falling in June of last year. South Korean gasoline prices, for example, have fallen by KRW 558.

Why, then, are North Korea’s market prices for fuel still rising? A reporting partner in the northern part of the country told ASIAPRESS that “it is because the authorities have drastically limited the amount (of fuel) circulating in the market,” further explaining that:

“Supplies of fuel are under state control, but state-run fuel supply depots have sold fuel into markets, allowing anyone to buy it. There has also been a lot of corruption in the military and other government agencies, with people siphoning off fuel (where they can). As a result, it’s now become difficult to buy fuel at fuel supply depots. They don’t sell the fuel unless you have haengpyo, which are used by government agencies and enterprises.”

Haengpyo are akin to checks and are used by organizations to pay for goods or services.

Another possible factor is that while North Korean market prices do tend to follow global ones for many goods, they often do so with a significant time lag. This results from the many barriers that disconnect the North Korean economy from the rest of the world, making it react more slowly to global changes than other countries.

I’ve often pointed out that differences in the relative price between corn and rice is one of the most relevant metrics we have access to for assessing North Korea’s food situation. The two main staple foods are, depending on the season and other factors, corn and rice. Corn is generally much cheaper than rice, because rice is the preferred (and therefore more expensive) good. Corn prices increasing in a way that isn’t seasonally normal is, therefore, a possible sign that the overall food supply is decreasing (for more, see this post).

This is precisely what Daily NK reports is happening, and they in fact note the highest rice prices ever recorded in their index (though this does not seem to take inflation into account). Rice prices are going up more than normal for this time of year, and so is demand for corn:

Early March rice prices in North Korea have hit their highest point ever compared to prices surveyed in early March over the past five years, a recent Daily NK survey of commodity prices in North Korea has found. The survey also found that rice prices are not falling by much following last year’s harvest, but demand is rising for corn, a rice alternative.

According to Daily NK’s regular survey of North Korean market prices, a kilogram of rice in Yanggang Province’s city of Hyesan cost KPW 6,300 as of Mar. 5. That is 3.3% higher than two weeks ago on Feb. 19, when it cost KPW 6,100.

In Hyesan, the price of a kilogram of rice rose to KPW 6,300 in late November and began falling from December to KWP 5,620, but has been rising once again since mid-January.

In fact, early March rice prices in North Korea were found to be the highest ever of all Daily NK surveys taken in early March over the past five years.

[…]

In early March 2019, before North Korea shut its borders to prevent the spread of COVID-19, the price of rice in Pyongyang, Sinuiju and Hyesan was KPW 4,200, KWP 4,210 and KPW 4,400, respectively. In early March of this year, it was 38% more expensive in Pyongyang, 42% more expensive in Sinuiju and 30% more expensive in Hyesan.

The current rice prices are even higher than when rice and corn prices spiked following a spate of panic buying of grain after North Korea closed its border in January 2020.

Food prices, of course, vary heavily between regions, partially because domestic transport is so costly and slow:

In early March 2019, before North Korea shut its borders to prevent the spread of COVID-19, the price of rice in Pyongyang, Sinuiju and Hyesan was KPW 4,200, KWP 4,210 and KPW 4,400, respectively. In early March of this year, it was 38% more expensive in Pyongyang, 42% more expensive in Sinuiju and 30% more expensive in Hyesan.

The current rice prices are even higher than when rice and corn prices spiked following a spate of panic buying of grain after North Korea closed its border in January 2020.

In Pyongyang, however, the price of rice has fallen somewhat compared to Daily NK’s survey of prices taken in mid-February. A kilogram of rice in Pyongyang’s markets cost KPW 5,800 as of Mar. 5, 3.3% less than it cost on Feb. 19, when it cost KPW 6,000.

The fall in rice prices in Pyongyang suggests that the city’s residents may have been able to recently purchase grain through state-run food shops.

[…]

Meanwhile, the price of corn in North Korean markets is rising more sharply than the price of rice.

As of Mar. 5, a kilogram of corn in the markets of Pyongyang, Sinuiju and Hyesan cost 6 to 11% more than it did in Daily NK’s survey in February.

A kilogram of corn cost KPW 3,000 in Pyongyang, 11% more than it did on Feb. 19, which essentially means that while demand for rice fell in Pyongyang, demand for corn skyrocketed.

In fact, the price of corn this year is at a five-year high for early March.

This is all happening despite reports that the state has directed its food shops, that usually only operate sporadically, to sell at subsidized prices, with the regime using state supplies to drive down the market price (I spoke with Daily NK about this in a recent interview).

Many question marks remain. My biggest concern about the information that we’re getting right now is regional bias. It’s always an inherent risk in any information coming out of North Korea through grassroots sources. But with border controls tightening so much since the onset of the pandemic, getting information out has become significantly more difficult. With fewer sources — and no one really denies this is the case — single data points from specific regions can carry comparatively larger weight, distorting the overall image.

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What’s going on with North Korea’s agriculture?

Thursday, March 2nd, 2023

By: Benjamin Katzeff Silberstein

As the South Korean government has said, this week’s meeting in Pyongyang on the food situation is as close to an open admission either of serious food shortages already prevailing, or that the regime forecasts that things will get worse. But what do we really know? In this post, I look at two main indicators: reports and testimonies from inside North Korea reported by the defector-run news outlet Daily NK, and market prices, primarily of corn and rice.

Overall, the food situation appears significantly more difficult than usual. Increased corn prices is perhaps the most worrying indicator. Comparisons with the famine of the 1990s still aren’t warranted, but there are worrying signs that the state wants to tighten control over agricultural production. At the same time, some of the policies put forward by the government make relative sense, in particular those reported by Daily NK (and have not been confirmed by the government). In conclusion, the situation appears concerning and could reasonably be called a “crisis”, but it still does not appear to be in disaster territory. This could change quickly depending on weather conditions and government policies, particularly on border trade.

 

A note of caution

It’s important to bear in mind that the North Korean regime carefully plans what messages it wants to send to the outside world. It’s not always clear exactly what that message is, but it does exist. The government has a purpose in holding a public meeting of this sort, and in telling the world about it. That’s not saying the regime is being dishonest about the situation, but they do have a clear incentive to let China first and foremost, but also the international community at large, know that they need food assistance. It could also be directed towards the broader international community, and there have been reports that the government has been in talks with UN organs about food aid.

 

The food situation and Covid-19

North Korea’s food situation has made a peculiar and sad journey over the past few years. During Kim Jong-un’s first few years in power, agricultural production increased for the most part, a pattern that began already under Kim Jong-il. The food situation overall continued to seem stabile, for the most part, throughout the “maximum pressure” and negotiations of sanctions in 2017–2019. Things really became problematic when North Korea shut its borders to foreign trade in the winter of 2020 to stave off Covid-19. Although North Korea doesn’t (openly) import much food, its agricultural system relies on imports of fertilizer and some agricultural equipment, and spare parts for tractors and machines.

The border closure also significantly disrupted the flow of information from the country. Because of the government’s strict enforcement of border controls, it has become significantly more dangerous and difficult for independent organizations (mostly based in South Korea) with sources inside the country to keep in regular contact, and traders and smugglers cannot venture over to China in the same way they normally have since the early 2000s. North Korea has always been a closed society, but this is even more true since the beginning of the pandemic.

 

What does the state say?

To understand how the North Korean government sees the agricultural situation, it’s worth looking in-depth at the summary report published by Rodong Sinmun today (March 2nd, 2023). The current spotlight on agriculture is really part of a longer focus that began in 2021, and isn’t as sudden as the global interest in it (my emphasis throughout the text):

The plenary meeting of the WPK Central Committee had a discussion of historic significance to comprehensively analyze and review the work for 2022, the first year of implementing the programme for the rural revolution in the new era, and further concretize the important tasks and long-term objectives for putting the agricultural production on a stable and sustained growth track and the urgent tasks arising at the present stage of the national economic development and the practical ways for carrying them out.

North Korean parlance has a way of making every issue “the most important”, but it’s very clear that agriculture is explicitly front and center on the economic policy agenda:

The concluding speech raised again the revolutionary change of the rural communities at the present stage of struggle as an important revolutionary task for achieving the prosperity and development of the state and the promotion of the people’s well-being, and put forward the principled matters to be maintained in implementing the programme for the socialist rural revolution in a perfect way. 

It referred to the intention of the Party Central Committee which set the attainment of the grain production goal as the first target of the 12 major goals for the national economic development and the main purpose of the current enlarged plenary meeting, and raised the main goals and tasks for agricultural development.

The problem is, of course, what to do in practice. The report is short on specifics and concrete details, and most statements related to policy appear to advocate modernization for the sake of it, but with what resources? Highlighting the role of irrigation and mechanization suggests the government does have a sense of the most central challenges on the ground, but to develop these areas, North Korea would need to import both machinery and spare parts:

It is necessary to set it as a priority task in ensuring the stable development of agriculture at present to accelerate the completion of the overall irrigation system to cope with abnormal climatic phenomena, and dynamically push ahead with the irrigation project planned for this year and perfect the irrigation system of the country in the period of the five-year plan.

The machine-building industry and agricultural sectors should produce and supply to the rural communities more new and high-efficient farm machines which are the most necessary and effective in putting the agricultural production on a modern and advanced basis, while steadily propelling the work for renovating the farm machine sector in an innovative way. 

From a policy perspective, the emphasis on the role of the state is worrying. In other policy areas, North Korean rhetoric over the past few years has been clear that the state seeks to take back control over the direction of the economy from markets and other non-government players. Further centralizing state control over agriculture could be devastating for efficiency, but I’m not sure this section of the report must be read that way. Rather, it could be about local government organs supporting farmers with what they need (again, unclear with what money):

In order to increase the nationwide agricultural output, attention should be paid to overcoming the lopsidedness in the guidance on farming and keeping the balance to be responsible for farming as a whole and it is important to concentrate on increasing the per-hectare yield at all the farms. This is an important principle for guidance on the agricultural production.

The General Secretary stressed the need to enhance the role of the provincial, city and county guidance organs and all the farms in attaining the long-term objectives of agricultural development.

[…] 

The concluding speech put forward the measures for further expanding the rural construction this year and the policy-oriented tasks to be prioritized and pushed forward with by cities and counties.

In order to attain the gigantic long-term objectives of rural development, it is necessary to decisively strengthen the Party guidance over the agricultural sector and improve the rural Party work.

[…]

He stressed the need for all Party organizations to intensify the struggle against the practices of weakening the organizational and executive power of the Cabinet, the economic headquarters of the country, and thoroughly orient and subordinate the Party work to the implementation of the Party’s policies, thus getting their working efficiency verified in the practical struggle for attaining the 12 major goals for the development of the national economy this year.

 

Reports from independent sources

A few recent articles from Daily NK (henceforth DNK) shine interesting light on the situation. Their reporting gives the impression of a protracted, difficult situation rather than a sudden emergency. DNK reports, for example, that the North Korean currency has strengthened against foreign currencies with expectations that trade may soon begin again:

Because hopes of expanded trade have been frustrated several times before, North Koreans are not rushing out to secure foreign exchange even when the government hands down orders regarding the expansion of trade.

According to Daily NK’s recent survey of North Korean currency rates and market prices, the US dollar was trading at KPW 8,400 in Sinuiju, North Pyongan Province as of Feb. 19.

As that figure represents a mere 0.2% increase from the previous survey on Feb. 5, when the dollar was trading at KPW 8,380, the rate does not appear to have changed significantly.

In Pyongyang as well, the dollar was trading at KPW 8,360, more or less what it was on Feb. 5, when it was trading at KPW 8,370.

[…]

With rising expectations of reopened trade repeatedly dashed over the last three years, trade-related directives from the North Korean authorities are not immediately translating into renewed trade, a reporting partner in North Hamgyong Province told Daily NK recently, speaking on condition of anonymity.

In fact, North Korean authorities issued orders on Feb. 10 to provincial trading agencies calling for submissions of general plans for import and export activities and foreign currency acquisition.

The reporting partner said trade has failed to restart several times during the COVID period even after the authorities said it would.

“As long as the government issues no clear permissions [to resume] trade, orders to merely prepare [to restart trade] are not leading people to buy yuan,” he said. 

DNK also reports that the steep, recent climb in food prices may have been generated by signals from the state that its food reserves increasingly need to be replenished. These price hikes are very significant, and far larger than normal:

North Korean market rice prices have recently skyrocketed after holding steady since last November’s harvest. A nationwide campaign of soliciting donations of “patriotic rice” may have helped fuel the dramatic rise in market rice prices.

According to Daily NK’s regular survey of market prices in North Korea, a kilogram of rice in Pyongyang’s markets cost KPW 6,000 as of Feb. 19. On Feb. 5, it cost just KPW 5,200, meaning the price climbed 15% in just two weeks.

Thus, the price of rice in Pyongyang climbed about KPW 6,000 for the first time in three months, having held steady in the KPW 5,000 to 6,000 range since last November.

The price of rice climbed in other regions, too. The price of rice in Sinuiju and Hyesan climbed 9% and 5%, respectively, between Feb. 5 and Feb. 19.

[…]

The recent spike in North Korean rice prices is smaller than the climb immediately following the border closure; however, the spike is much steeper that the usual increase in prices early in the new year.

On the other hand, the price of corn in North Korean markets has trended differently from region to region.

A kilogram of corn cost KPW 2,700 in Pyongyang as of Feb. 19, 6% less than it did on Feb. 5, when it cost KWP 2,900.

This means that while demand for rice has increased in Pyongyang, demand for corn has fallen.

In Sinuiju, a kilogram of corn cost KPW 3,000 as of Feb. 19, the same as it did earlier in the month. On the other hand, in Hyesan, the price of corn has climbed. A kilogram of corn in Hyesan’s markets cost KPW 3,300 as of Feb. 19, 6% more than it did on Feb. 5, when it cost just KPW 3,100. In Hyesan, the price of rice and corn both rose 5 to 6%. 

The state is both supporting market prices more through grain distribution, but also demanding more from the people. This means that while prices have been kept somewhat stable by the state opening its storage houses for some public distribution during the winter, the state is signaling shortages by demanding more rice from the public:

The recent climb in market rice prices appears influenced by the country’s nationwide campaign for “patriotic rice” contributions and insufficient supplies at official grain shops.

Daily NK recently reported through a source in North Hamgyong Province that North Korea is asking all citizens to contribute at least 5 kilograms of “patriotic rice.”

There are price differences region to region, but since rice generally costs twice as much as corn, the North Korean government is treating 10 kilograms of corn as equal to five kilograms of rice when accepting donations. In fact, many North Koreans are donating whichever grain is cheaper in their areas of residence. As a result, rice prices have spiked sharply in Pyongyang and Sinuiju, where rice had been relatively cheap compared to corn.

Moreover, entering February, state-run food shops have sold only small amounts grain to consumers, which appears to have helped contribute to the spike in market grain prices. 

Thanks to DNK, we also have some sense of at least what some North Koreans have been told about the plenary meeting on agricultural issues. Interestingly, the policies mentioned appear much more prudent and wise than those included in the Rodong Sinmun report:

In particular, North Korea’s government ordered each province to secure irrigation facilities appropriate for their geographic conditions and draw up plans to ensure water for terraced fields, calling irrigation facilities that work no matter what the climatic conditions “the most important issue.”

North Korea’s leadership also ordered the preparation of various data, including soil analyses of farmland, analyses of irrigation conditions and analyses of progress in agricultural mechanization.

[]

The province’s authorities also ordered the writing of a draft plan for scientific farming in accordance with soil and lot conditions, and called on officials to hurry construction of modern agricultural housing as per this year’s plans, the source said.

How far these measures can go is very hard to tell and, again, no major change will occur unless the state dedicates significant resources to agricultural development. That would mean moving resources from higher-priority areas, which the state is unlikely to do in the near future.

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