North Korean Economy Watch

UPDATE: Follow up by Dr. Petrov in the comments. 

One of the big question marks for policy makers (both inside the DPRK and internationally) is the state of knowledge and public opinion inside North Korea.  How much do North Koreans know about the outside world?  How much of the propaganda do they believe?

Being able to answer these questions scientifically is not possible.  Political expression has never been encouraged in the DPRK except through state-sponsored solidarity events.  Additionally, the role of the media in North Korea is to broadcast information from the top down, not to let it percolate from the bottom up.

Numerous scientific efforts at extrapolating North Korean public opinion have been made by journalists and scholars conducting surveys in northern China along the North Korean border (most recent examples here and here).  However, these surveys are subject to various sample biases: the interviewees have already decided to leave the DPRK, most of them come from the provinces along the Chinese border, and most of them are not mid- upper- level cadres.  So extrapolating the opinion of the median ri-level party secretary in a small village near the DMZ is not possible. 

In the absence of a scientific survey, we are forced to resort to anecdotes and ethnographic data (usually with a very small “n”).  A single anecdote is not so valuable, but multiple anecdotes taken together help us paint a more comprehensive picture. The opinions of most “North Korea watchers” on this topic are formed by this kind of ethnographic analysis. 

I rely on personal anecdotes collected from North Koreans, visitors to North Korea, and former residents of North Korea, supplemented by stories in the media such as the popularity of South Korean films in the DPRK.  These lead me to conclude that though North Koreans are generally not internationally savvy, they do not believe the official propaganda and do not pay attention to political speeches (if they can help it) for many of the same reasons that Americans do not pay attention to political speeches: namely that they have little to do with one’s day-to-day needs, and they get very old very fast.

This story in the Daily NK is one more anecdote:

A source from Yangkang Province told DailyNK in a phone interview on May 1st, “At the Union of Democratic Women (UDW) conference, commemorating the founding of the Chosun People’s Army on April 25th, a speaker humiliated herself when she blamed South Korean President Lee Myung Bak [for the crisis].”

The source told our reports that “during the conference, a speaker explained the international and domestic state of affairs, saying that ‘the U.S. and the puppet regime (the Lee administration) have overridden the peaceful agreements between the North and South (referring to the June 15th Joint Declaration and the October 4th Agreement) in order to create a serious food crisis in our Republic (North Korea)’.”

The source described an awkward atmosphere at the conference: When a chairperson of the People’s Unit of Hyehwa-dong in Hyesan asked outright, “We can understand that fact that Americans and Lee’s puppet factions are not aiding us with rice, but, why won’t China help us, as our closest ally?” The speaker’s face turned pale at the question and a sudden silence and tension filled the hall.

“At that moment, the lady next to the chairperson started chuckling, putting her head down, people began to chuckle here and there, and eventually, the entire hall was engulfed in laughter,” the source told DailyNK.

The speaker reportedly responded through his own laughter, “’You know the lecture material always reads like this. You can well understand the situation and know what I am saying, right?’” The source said that “his comment sent people rolling in the aisles,” and pointed out, “The situation showed how absurd the propaganda released by the authorities is.”

Read the full story here:
Government Lectures are Losing Effect
Daily NK
Lee Sung Jin
5/8/2008

UPDATE: photos from North Korea’s first cricket game:

ORIGINAL POST:

The venue: Mt. Taesong Park.
Click on image for larger view.

This week Pyongyang hosted its first ever cricket match.  I hope to get an update on the game when the team returns to China.  Until now, here is what we know from the Telegraph:

The three visiting teams for the Twenty20 tournament will be largely expatriates from England, Australia, South Africa and Holland who are based in Shanghai.

The North Korean side will be boosted by staff from the Indian and Pakistani embassies.

The tournament was planned by Bryan Clark, a British employee of the logistics firm DHL, which has an office in Pyongyang, and the Shanghai Cricket Club, which has been leading attempts to develop the game in China.

Read the full story here:
North Koreans take on the English at cricket
Telegraph
Richard Spencer
4/24/2008

Andrei Lankov is the first in the media to construct a narrative which details the series of decisions that have led to North Korea’s current food crunch.

From his article:

Merely a year ago, North Korean leaders were optimistic. The good harvest of 2005 persuaded them that food shortages were behind them, and that North Korean agriculture had begun to recover. The 2005 harvest was merely 4.6 million tons, well below the 5.2 million tons which are necessary to keep the entire population alive. Still, it was clearly an improvement.

Lankov’s assertion that 5.2 million tons of grain are needed to sustain the DPRK population comes from the UN.  Recent work by Marcus Noland estimates that this number is closer to 4.6, although exact figuress are not possible because the actual size of the DPRK population is unknown.

In addition, for a decade South Korean administrations have maintained their Sunshine policy of unilateral concessions and unconditional food aid. Since 2000, about 450,000 tonnes of food have bee delivered to North Korean granaries from the South every year, free of charge. Its distribution was almost unmonitored. Pyongyang leaders came to believe that such aid would continue for the foreseeable future. Additionally, increasing Chinese involvement with North Korea, while not necessarily welcomed by Pyongyang, was seen as a sign that additional food would be coming – and Chinese shipments were roughly equal to those of South Korea. Finally, the basic agreement with the US on the nuclear issue was perceived in Pyongyang as a sign of Washington’s willingness to pay generously for rather minor concessions.

As noted by many besides Lankov (here), this good fortune prompted the DPRK government to reimpose elements of the planned economy which failed long ago: 

In 2005, authorities claimed that the public distribution system would be completely revived, and banned private trade in grain. This ban was generally ignored and eventually failed, but subsequent moves were more successful. In late 2006, authorities banned male vendors from the country’s marketplaces. In 2007, women under 50 years old were also prohibited from engaging in business in markets. The assumption is that every able-bodied North Korean should go where he or she belongs, specifically to the state-run factories of the Stalinist economy.

The government also staged some campaigns against semi-legal private businesses that had been tacitly tolerated since the late 1990s. After 2005, authorities successfully cracked down on the trafficking, smuggling and illegal labor migration occurring on the border with China. There was also a remarkable increase in the volume of anti-market rhetoric in the official Pyongyang propaganda.

The economic problems they were attempting to achieve at home through these policies, however, were only the first of several shocks to hit the DPRK economy in the last year: 

1. Low harvest numbers

First of all, the 2007 harvest was a failure. It was estimated at only 3.8 million tons, well short of the critical 5.2 million ton benchmark [and Noland’s 4.6 benchmark]. As usual, floods were officially blamed (as if the impoverished North does not share the same small peninsula with the prosperous South, where no signs of food shortage have been seen in decades).

2. Drop in aid from South Korea

The presidential elections of December 2007 led to a change of leadership in Seoul. The new government, led by right-of-the-center pragmatist Lee Myong-bak, said that the era of unconditional concessions to the North was over.

3. International food prices rising

The situation was aggravated by the explosive rise of international food prices. The North Korean press has reported the trend widely obviously in an attempt to,place the blame for the current crisis on factors clearly beyond the government’s control. On April 20, Nodong Sinmun, the major official daily newspaper, ran an article that described food supply difficulties worldwide and mentioned a dramatic increase on food custom duties in “certain countries”.

4. Cold shoulder from China

The worldwide price hike means that the amount of food coming to North Korea via foreign aid channels is likely to decrease. China, preoccupied with the Summer Olympic Games in August, and increasingly annoyed by North Korean antics, is not too willing to help the North out of its trouble which, as some people in Beijing believe, were brought on Pyongyang by its own stubborn resistance to the Chinese reform model.

So what is Lankov’s prediction?

In North Korea, the domestic food situation is deteriorating fast. The sudden hike in food prices seems to be a sign of deepening crisis. There were reports about farmers who refuse to toil the state-owned fields, stating that they are too weak to work (but still willing to work on their private plots). There are rumors of villagers starving to death even though observers believe the food shortage has not yet developed into a famine. If the shortage of fertilizer damages this year’s harvest, a famine may develop by the end of this year.

The political consequences are unclear. Knowledge about the situation inside North Korea remains grossly inadequate. If the past is an indication, however, nothing of great political significance will happen if a few thousand fresh graves appear in the hills of North Hamgyong province. In all probability, Kim Jong-il’s government will use its time-tested tactics: the political elite and the best units of the army will receive full rations; the residents of major cities, police and common soldiers will get barely enough to survive; and the “politically unreliable”, largely villagers from the remote northwest, will be left to their sorry fate.

There is hope the government will momentarily halt its counter-offensive against free market economics, and will ease its border controls to allow more people to China – but even such moderate measures are unlikely. Isolated revolts are possible, but the government seems to be supremely confident. After all, the disorganized, isolated population, deprived of any opportunities to organize or even communicate between themselves, is not capable of challenging the system.

Read the full story here:
North Korea stoic in the face of famine
Asia Times
Andrei Lankov
4/30/2008

On Wednesday I attended a panel discussion featuring Marcus Noland, co-author (with Stephan Haggard) of Famine in North Korea, and three North Korean defectors.  Here is the video of the event.  Below is the information on the event from the Peterson Institute website:

Press release (slightly updated w/ comments from the talk)
North Korea is once again headed toward widespread food shortage, hunger, and risk of outright famine. According to Peterson Institute Senior Fellow Marcus Noland, “The country is in its most precarious situation since the end of the famine a decade ago.”

Click for larger view

Calculations by Noland and Stephan Haggard, University of California, San Diego, indicate that the country’s margin of error has virtually disappeared. For technical reasons, estimates produced by the United Nations’ World Food Program and Food and Agriculture Organization (total demand) probably overstate demand implying recurrent shortages year after year (figure 1 above). Noland and Haggard argue that in recent years available supply has exceeded more appropriately calculated grain requirements (adjusted total demand) but that this gap has virtually disappeared. “This is a yellow light about to turn red,” says Noland.

 
Click for larger view

Food prices have almost tripled in the last year, skyrocketing at a rate faster than either the overall rate of inflation or global food prices (figure 2 above). Anecdotal reports describe a breakdown in institutions and increasingly repressive internal behavior. Noland and Haggard forecast that the North Korean regime will ultimately weather this challenge politically by ratcheting up repression and scrambling, albeit belatedly, for foreign assistance.

The North Korean food crisis, now well into its second decade, presents a difficult set of ethical choices. North Korea is critically dependent on food aid, but the government has recklessly soured its relations with the donor community. Yet in the absence of vigorous international action, the victims of this disaster will not be the culpable but the innocent. As of this writing, it already may be too late to avoid at least some deaths from hunger, and shortages of crucial agricultural inputs such as fertilizer are setting the stage for continuing food problems well into 2009.

Paper presentation
Noland discussed two recent papers, written with Haggard and Yoonok Chang, Hansei University, which are based on a pathbreaking survey of more than 1,300 North Korean refugees in China (11 different cities).  The survey provides rare and extraordinary insight into both life in North Korea and the experiences of the refugees in China.

Paper 1: Exit Polls: Refugee Assessments of North Korea’s Transition 
Results from a survey of more than 1,300 North Korean refugees in China provide insight into changing economic conditions in North Korea. There is modest evidence of slightly more positive assessments among those who exited the country following the initiation of reforms in 2002. Education breeds skepticism; higher levels of education were associated with more negative perceptions of economic conditions and reform efforts. Other demographic markers such as gender or provincial origin are not robustly correlated with attitudes. Instead, personal experiences appear to be central: A significant number of the respondents were unaware of the humanitarian aid program (40%) and the ones who knew of it almost universally did not believe that they were beneficiaries (96%). This group’s evaluation of the regime, its intentions, and accomplishments is overwhelmingly negative—even more so than those of respondents who report having had experienced incarceration in political detention facilities—and attests to the powerful role that the famine experience continues to play in the political economy of the country.

Paper 2: Migration Experiences of North Korean Refugees: Survey Evidence from China 
Chronic food shortages, political repression, and poverty have driven tens of thousands of North Koreans into China. This paper reports results from a large-scale survey of this refugee population. The survey provides insight not only into the material circumstances of the refugees but also into their psychological state and aspirations. One key finding is that many North Korean refugees suffer severe psychological stress akin to post-traumatic stress disorder. This distress is caused in part by their vulnerability in China, but it is also a result of the long shadow cast by the North Korean famine and abuses suffered at the hands of the North Korean political regime: first and foremost, perceptions of unfairness with respect to the distribution of food aid, death of family members during the famine, and incarceration in the North Korean gulag, where the respondents reported witnessing forced starvation, deaths due to torture, and even infanticide and forced abortions. These traumas, in turn, affect the ability of the refugees to hold jobs in China and accumulate resources for on-migration to third countries. Most of the refugees want to permanently resettle in South Korea, though younger, better-educated refugees prefer the United States as a final destination.

Other speakers: Several North Korean defectors also spoke as part of North Korean Freedom Week here in Washington DC.  Comments and biographies below:

Kim Seung Min: Founder and Director of Free North Korea Radio, the broadcasting program providing news and information to North and South Korea and China. Kim attended both elementary and high school in Pyongyang before serving in the North Korean Army. He escaped from North Korea to China in 1996 but was arrested and repatriated. While traveling from Onseong to Pyongyang to face punishment for leaving the country without government permission, he jumped from a moving train to escape to China again and eventually made his way to South Korea. He worked as a laborer at a coal factory in Yenji, China, until his uncle in South Korea helped him to escape to South Korea. He attended Yonsei University and Graduate School at Joong Ang University, where he received a Master of Arts degree. After serving in leadership roles in the North Korean defector groups, he founded Free North Korea Radio, which was available on the internet beginning April 2004 and began broadcasting on shortwave in December 2005 with regular daily broadcasting beginning in April 2006. (Born 5/6/62 in Jangang Do, North Korea)

*Mr. Kim was a captain in the KPA for 16 years.  He talked about how soldiers were no better off in terms of access to food than ordinary North Koreans.  Starting in 1986, the DPRK state limited food supplies to the military to only rice, leaving the generals up to their own devices for feeding the army.  This led to a break-down in discipline and now people resent the personal behavior of many soldiers who are looking for food.

Kang Su Jin:Founder and Representative of the Coalition for North Korean Women’s Rights, the only organization focused specifically on increasing awareness of the horrors facing North Korean women in China, the role of women in democratizing North Korea, empowering and encouraging North Korean women who have resettled in South Korea, and building cooperation with other organizations. Kang was a member of the elites from Pyongyang and was the Manager of Supply from 1991 to 1998 of the Bonghwasan Hotel in Pyongyang, the biggest hotel in Pyongyang, which catered to high-ranking party and army officials and was used for special events. When food distribution stopped in Pyongyang in 1996, the regime announced that all hotels had to operate on their own, and conditions became very difficult for the workers. Kang visited China and saw how much better off the people were and decided to defect to South Korea. (Born 10/23/66 in Pyongyang, North Korea)

Kim Young-il:President and Founder of People for Successful Korean Reunification (P-SCORE), an organization founded in the fall of 2006, specifically to ensure the successful reunification of the Koreas would not adversely affect the South Korean economy. To that end, PSCORE, chiefly composed of young people, studies other reunification models, informs about the human rights conditions in North Korea, and prepares and educates young North Koreans to be ready to help lead a reunified Korea. Because Kim was not born into an elite family in North Korea, he was not allowed to attend university and was destined to become a coal miner after serving his mandatory military service. While in the military he witnessed many people including soldiers dying of starvation. His own uncle died of starvation and his cousins were left to wander the streets. His family made the decision to defect to China in August of 1996 instead of starving to death in North Korea. They survived there for five years bribing the police not to turn them in until they safely defected to South Korea in January 2001. Lim received a BA in Chinese from Hankook University of Foreign Studies in August 2006. (Born 4/10/78 in Hamheung, North Korea)

*Mr. Kim still communicates with people in the DPRK on a regular basis.  He said that the price of rice inside the DPRK is sensitive to external supply shocks (or even the rumors of external supply shocks).  This means that reports of aid cut offs could result in temporary domestic price spikes even if aid is delivered.

UPDATE: Photo and coverage in the Daily NK.

The Commission on International Religious Freedom has worked actively since its inception to draw the world’s attention to ways that the internationally guaranteed right to freedom of thought, conscience, and religion or belief is consistently—and severely—violated by the North Korean government. The Commission has devoted considerable resources to helping voices that are heard all too rarely—the voices of North Koreans—to reach policymakers far beyond the DPRK’s borders. The reality of life for the people of North Korea can perhaps best be summarized by the words of one former government official, “The only reason the North Korean system…still exists is because of the strict surveillance system… North Korea is a prison without bars.”

Here is their latest publication:
“A Prison Without Bars”: Preface

“A Prison Without Bars” (Complete PDF)

Here is all their North Korea information.

The article is badly translated, but [seemingly] according to the People’s Daily (h/t Go East) China is looking to outsource programming/animation services to North Korean workers in Dandong:

The main reason to select Dandong city as the China-North Korea animation game service outsourcing base is aimed to draw North Korea’s animation game talents to Dandong. Xu Aiqiao, chairwoman of the Hangzhou national animation game public service platform limited, said that North Korea has become the global animation industry processing “plant”.

With a total staff of 2,500, the base will not only reduce at least 5,000 yuan per minute for the production costs of animation companies, but inject more energy into the creative plans, original scripts, and other areas of China’s high-end animation talents of the animation game.

Read the full article here:
Hangzhou game service outsourcing base to make up 80 pct of domestic animation production
People’s Daily
4/29/2008

Why is this topic being discussed on North Korean Economy Watch?

Well, economics is often accused of being an “imperial” science by other disciplines because, broadly defined, economics looks at human choice and the constraints, trade-offs, and incentives under which these choices are made.  This broad definition irritates sociologists, anthropologists, and political scientists because economists are always moving in to explain social phenomenon on their “turf.”  In this light, though, economics does have something to say about sexual social norms because they play a significant role in a significant number of every-day choices that people make, particularly in what are traditionally considered “economic choices”…even in North Korea.

On to the topic…
One would think that in North Korea—where personal associations and loyalties are particularly important and highly regulated—that non-marital sexual encounters would be highly suspicious and discouraged, but a recent article in Radio Free Asia makes the opposite claim:

[W]hen it comes to the privacy of the bedroom, even the all-powerful North Korean Workers’ Party is largely hands-off, according to North Korean defectors.

Intellectuals and artists in the Workers’ Paradise have long espoused a fairly open and liberal set of views around sexual relationships, according to former North Korean artist and defector Lee Yoon Jeong, despite a widespread lack of sex education for young people.

Apparently, pre-, extra-, and post- marital sex is so common that even the Workers Party doesn’t ban it:

Lee said high divorce rates, and the tendency for Party officials to have mistresses and extra-marital affairs, meant that the Party was reticent about dictating to the people about their love lives.

“The Workers’ Party is truly in no position to regulate relationships between men and women,” she told reporter Jinhee Bonny. “The authorities may control everything, but they could never dictate matters of love between North Korean men and women.”

The artcle also makes the claim that prostitution is fairly common now and that illegal abortions are taking place.  If this is the case, then North Korea is only the second communist country I am aware of where abortion is/was technically illegal (the other being Ceauceascu’s Romania).  Does anyone know any differently?

Read the full article here:

Love and Sex in North Korea
Radio Free Asia
Jinhee Bonny
4/18/2008

UPDATE: You Tube has video footage of the Pyongyang leg of the Olympic torch relay taken from foreign news sources.  Judging from the videos, it looks like the ceremony kicked off at the Tower of the Juche Idea, and Pak Do ik was the first relay runner.

Here is coverage on CNN  (the announcers make at least two mistakes.  They identify the paper flowers people are waiving as Kimjongilia, and they call Kim Jong Il North Korea’s “President”– let’s get with the program people).

Here is coverage on Russian Television.

Here is more extensive print coverage from the AP.

I still have not managed to find the entire olympic torch route in Pyongyang or official DPRK coverage of the event.  If you find this information, please let me know.

ORIGINAL POST:   

North Korea’s most famous footballer (domestically), Pak Do ik, will be carrying the Olympic torch (for the first time ever) through Pyongyang:

Pak was introduced to modern western audiences through his appearance in the documentary The Game of Their Lives, released in 2002.  He scored the winning goal against Italy in the 1966 World Cup allowing the DPRK to enter the quarter finals (where the the DPRK lost to Portugal after being up 3-0 early on).

80 individuals were selected for the torch relay, and most are DPRK citizens with significant athletic accomplishments under their belts–such as Jong Song-ok, who won the 1999 World Athletics Championship. The remainder of the runners are officials with the International Olympic Committee, the Chinese Embassy in Pyongyang, representatives of Chinese residents in North Korea and major sponsors of the torch relay.

It also looks like the torch might cross the DMZ: 

The torch is set to pass from South Korea to North Korea in the early hours of April 28 before heading to Vietnam that evening aboard a flight.

The 20-kilometer (12.4-mile) section linking Juche Tower to Kim Il Sung Stadium, both major landmarks in Pyongyang, was chosen for the event, it said.

It indicated Pyongyang citizens will be mobilized to stand along the street while the torch passes, by saying, “A large welcoming crowd will cheer for the torch runners.” (Joong Ang Daily)

UPDATE: According to Yohnap, the torch will be flown from Seoul to Pyongyang.  

Read the full article here:
Athletes selected to carry the torch in North Korea 
Joong Ang Daily
4/21/2008

N.K. preparations for torch relay almost complete: KCNA
Yohnap
4/23/2008

According to the Daily NK, many mid-level civil servants who used to receive enough rations to live on have now resorted to trading in the markets with the civilians.

“Since April, the government has only been giving out provisions to the head of each department of the People’s Safety Agency in Hyesan, Yangkang Province. As for the remaining staff, only 15-days worth of one-serving provisions have been supplied. The discontent among the agents of the People’s Safety Agency over the discrimination is quite significant.”

“With conditions worstening, those who have not been engaging in sales until now—the Provincial People’s Committee or the Municipal Committee leaders and average schoolteachers, doctors and their families—have been coming out to the alleyway markets. They do not even have a street-stand in a jangmadang, so they sit illegally in the alleyways, but the People’s Safety agents in charge of regulating the jangmadang have been reluctant to take action against them because they know who these people are.”

Is anyone starving?  Thankfully, it seems not yet..

In response to the question as to whether people have begun to starve to death as a result of the food shortage, the sources confirmed, “We have not reached that point yet.”

Our contact in Yangkang Province said, “During the ‘March of Starvation’, we did not even have brewers’ grains to eat, but now, people feed that to the pigs. It is true that living conditions have become a bit more difficult with the rise in food prices, but it has not reached the point of starvation.”

The Hoiryeong source also said, “With the significant rise in food price, the quality and the amount of rice have fallen quite a bit, but people have not been starving for days at a time. People who previously consumed only rice are now mixing rice and corn 50/50, and those in more dire situations eat 30/70 or 20/80.”  

The food situation in Ryanggang is probably better then most of the country on average due to its proximity to the Chinese border.

The full story can be read here:
The Price of Rice Has Risen, But Not to the Point of Starvation
Daily NK
4/22/2008
Lee Sung Jin

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-4-21-1
4/21/2008

The March issue of “Rimjingang”, a magazine publishing stories on life inside North Korea as reported by defectors and those still inside the DPRK, contains an eye-opening report on activities in North Korea’s markets.

Since 2003, North Korean authorities have legalized DPRK markets throughout the country. The previously existing farmers’ markets were remodeled into ‘combined’ general markets and all traders were permitted to sell their wares. After the legislation was passed, even in Pyongyang general markets emerged in each neighborhood.

According to the magazine, more than 60 markets have been set up, with each market housing around 50 traders. The use of mannequins at clothing stores and attractive price tags used to catch the eye of the shopper are in force. These days, it is not even surprising to hear cassette players extolling the virtues of a particular vendor’s goods. Sellers here do not speak abruptly to customers as they might in a State-run store. In markets, one can hear respectful language used even to children. These are not ideas taught by the labor bureau, but rather independent ideas put to use by the sellers.

Stalls selling a variety of seafood can also be found in a number of markets. Mackerel, squid and flatfish from the East Sea are among the surprisingly fresh products on display. This seafood is not on display courtesy of the North Korean government, but rather is delivered by private entrepreneurs running refrigerated trucks from the coast to Pyongyang. According to the magazine, a number of delivery services are in operation, providing goods to the highest level of North Korean society.

Around Pyongyang, a number of flower sellers have also popped up in the capitalist markets. It is custom to give flowers whenever there is an event in honor of Kim Il-sung or Kim Jong-il; but these days it is also popular for couples to give each other flowers as gifts. Even before the emergence of these markets, there was nothing that couldn’t be found in Pyongyang as long as someone had the money to purchase it.

Currently, women under the age of 39 are prohibited from working in markets, and efforts to extend this restriction to women under 49 have raised tension with many women trading in the markets. ‘Good Friends’, an organization aiding North Korea, has reported that recently thousands of women have organized in protest against security forces in the farmers’ market in Chungjin.