North Korean Economy Watch

The Daily NK, reports on a interesting claim by Kim Kwang Jin, senior fellow at the Institute for National Security Strategy:

In his article “The Dollarization of North Korean Economy and Dependence on Foreign Currency by the Residents,” [Kim Kwang Jin] analyzed “dollarization of North Korean economy is a result of the disintegration of the official economy and the subsequent spread of foreign currency rather than the government’s foreign currency policy.”

The total amount of U.S. dollars circulated and amassed by North Korean people was estimated 500 to 600 million dollars (100 per each household), [Kim Kwang Jin] suggested.

Kim’s further specification is as follows: “In the China-Korean border region, the Yuan is particularly popular, while in Wonsan (a seaport on the East Sea)[where the Mangyongbong 92 docks], the Japanese yen is attractive.”

According to Kim’s article, the North Korean people fully realize impossibility of withdrawing North Korean won from their bank accounts and the depreciation rate is too fast. Kim’s estimate was that “each North Korean household is secretly holding 100 dollars in average.”

Methodologically, I am not sure how valuable we should find the claim that the North Korean economy is dollarized to the tune of $100 per household (max of 6,000,000 households).  Averages do not tell us much in large populations because they do not address distribution questions (which are fairly significant).  For instance, a few individuals might have lots of cash, while most have relatively little.  What is the median distribution of dollars, and what is the mode? This data would tell us much more about grass-roots financial conditions in the DPRK, but this information is not available.

Also, Mr. Kim claims that North Korea has “foreign currency areas” along the Chinese border (Yuan) and around Wonsan (Yen).  This claim at least seems plausible for obvious reasons: These are areas where lots of trade and exchange take place.  So where is the dollar currency area?  With no major trading relations, why would there be one (outside of Pyongyang)? Where would all these $USD come from?

Finally, it seems that in the last couple of decades the Yuan and the Yen would be a superior mechanism than the dollar for protecting one’s savings in North Korea.  These currencies are used by the DPRK’s major (current and former) trading partners; these currencies have experienced low inflation in the last couple of decades (the Yen obviously doing a better job); and North Koreans could probably better explain to any curious officials why they have them if they were under scrutiny.

All of these topics might have been addressed in the paper, but I have been unable to find a copy in English.

From the Daily NK:

There had been eight of us in the group, including my brother. Among us, the females included myself and a 13-year old named Shin Kyung Rim. Even though we could not wash our face, were worn out, and wore ragged clothes, there were strict rules and order unique to Kotjebis (street children).

Kotjebis have leaders and areas where they beg. Also, they never eat the food they steal or receive from begging alone, but share with others.

Kotjebis, even when they sleep during the winter, seat the children, the weak, and the women in the middle and the stronger ones sleep in the periphery so that they can block the wind. People may think female kotjebis sleeping in the center of the group might be strange, but they have rules to protect women and children. If they ignore such rules, they are chased out of the group and in extreme instances, have to be prepared for death.

Read the full article here:
Want to Show the Painful Legacy Left by Kim Jong Il
Daily NK
Han Soon Hee
4/16/2008

Last August I posted an excerpt from Andrei Lankov’s book, North of the DMZ, on the preservation of Kim il Sung’s body in Kamsusan Memorial Palace.  This year, the Daily NK (here and here) provides some new information on Kim il Sung’s imposing presence on the North Korean landscape.

First some statistics:

1.  There are approximately 70 Kim il Sung statues in North Korea (large statues a la Mansu Hill in Pyongyang).

2.  There are approximately 30,000 plaster busts.

3.  There are approximately 140,000 monuments and memorials

4.  There is allegedly one Kim Jong il statue in Pyongyang (although the Daily NK is the only source I have ever heard make this claim). 

5.  The first Kim il Sung statue was at the Mangyongdae Revolutionary School on 10/24/1948.  The second was in front of the Changjeon School in 1949. The most recent is at Kim il Sung University in 1996. 

Apparently all of the statues are made of bronze, but are coated in a gold paint every two years to prevent them from corroding.  The gold paint is allegedly imported from Germany (Can any German readers/speakers find out which German company supplies the paint?  How much? And at what cost? ).   

All of the likenesses of the Great Leader are exclusively constructed by the Mansudae Art Studio’s “Number One Works Department”  in Pyongyang.  The workers in this group are tested annually by a deliberation committee so they can be certified to work on Kim statues, etc.  These individuals are the only ones legally allowed to reproduce the leader’s image in North Korea.

Once a Kim statue is completed, it is transported by numerous agencies (security, party, and artists) to its destination where it is erected.  Lamps are supposed to shine on the statues from 10:00pm until 4:00am.  Local citizens are charged with keeping the area around the statue tidy (which can be verified on Google Earth).  In the event of an emergency (such as a war), many statues allegedly have dedicated bunkers in which they can be stored.

The Daily NK is running a couple of interesting pieces on Kim il Sung monuments and statues in the DPRK.  Both articles are worth reading (here and here), and I will comment on them more extensively in the near future, but the first article made a startling claim that I had to put to NKeconWatch readers: That there is a Kim Jong il statue in Pyongyang.

In contrast to the many Kim Il Sung’s statues, there stands only one Kim Jong Il statue. This is located in on the lawn of National Security Agency office building at the foot of Mt. Amee in Daesung district, Pyongyang. It was erected on Kim Jong Il’s 46th birthday in 1988 and is constructed not of bronze, but of gold.

In addition to the one standing statue of Kim Jong Il, all Colleague Kim Il Sung Revolutionary History Institutes, which are located in each major local office or agency, showcase plaster busts of the Kim son, and at the International Friendship Museum in Mt. Myohang, a large sitting statue was constructed.

I have spent about 20 days in the DPRK.  I know many people who have spent many many more, and I have never heard of any Kim Jong il statues.  Can anyone confirm this?  Any photos out there?

Rumors of food shortages in North Korea seem to be popping up everywhere (even on this website), so now any change in Pyongyang’s standard operating procedure is interpreted in the media as a direct result of this condition.  Changes in regime behavior might be related to food shortages, but then again, we are talking about the DPRK, and we don’t really know how or why many decisions are made.

The latest North Korean “Kremlinology” comes from Yonhap:

With neither foreign artists singing in praise of Kim, who is dubbed the “Sun of mankind” by the communist state, nor the standard massive gymnastic display performed by about 100,000 people on show, North Koreans started the two-day holiday in a low-key manner.

The North traditionally spends a lot on celebrating one of the nation’s biggest holidays on a grand scale, inviting many foreign musicians and art groups to perform in the “April Friendship Art Festival” that marks the birthday of the nation’s founder and unveiling large public monuments.

Pyongyang, however, has scaled down the previously annual event to a biennual in what analysts said is a measure to save badly needed foreign currency because of worsening hardships facing the country.

and as for Arirang…

The Koryo Tours website claims that Arirang will take place from August to the end of September.  This could change, but it is 2-4 weeks shorter than the last couple of years (although those were interrupted by floods!).

Read the full story here:
N. Korea marks late leader’s birthday amid economic hardship
Yonhap
Shim Sun-ah
4/15/2008

News of the DPRK’s food shortages began to surface several weeks ago when Good Friends reported:

North Korea’s chronic food shortage has worsened to affect even some of the country’s elite citizens in the capital, a South Korean aid group said Thursday.

The communist nation has not given rice rations to medium- and lower-level officials living in Pyongyang this month after cutting the rations by 60 percent in February, the Good Friends aid agency said in its regular newsletter.

Pyongyang citizens are considered the most well-off in the isolated, impoverished country, where the government controls most means of production and operates a centralized ration system. Only those deemed most loyal to Kim Jong Il’s regime are allowed to live in the capital.

The food situation is more serious in rural areas, with residents in many regions in the country’s South Hwanghae province living without food rations since November, the aid group said. (AP)

Why was this the case?

Floods last August ruined part of the main yearly harvest, creating a 25 percent shortfall in the food supply and putting 6 million people in need, according to the U.N. World Food Program.

Over the winter, drought damaged the wheat and barley crop, according to a recent report in the official North Korean media. That crop normally tides people over during the summer “lean season” until the fall harvest.

North Korea’s ability to buy food, meanwhile, has plunged, as the cost of rice and wheat on the global market has jumped to record highs, up 50 percent in the past six months.

China also appears to have tightened its food squeeze on North Korea for domestic reasons. In order to meet local demand and control inflation, Beijing slapped a 22 percent tariff on grain exports to the North. (Washington Post)

So North Korea’s domestic agricultural production has fallen and so have commercial food imports (international inflation, OECD government subsidies for bio-fuels, and increasing fuel prices have combined to raise the prices of commodities such as rice and pork up to 70% in the course of a year). 

Compounding this problem, however, agricultural aid from North Korea’s two most reliable benefactors (China and South Korea) has dried up.

[China] has quietly slashed food aid to North Korea, according to figures compiled by the World Food Program. Deliveries plummeted from 440,000 metric tons in 2005 to 207,000 tons in 2006. Last year there was a slight increase in aid, but it remained far below the levels of the past decade. (Washington Post)

And strained relations with the new Lee government in South Korea have not helped:

The South typically sends about 500,000 tonnes of rice and 300,000 tonnes of fertiliser a year. None has been sent this year and without the fertiliser, North Korea is almost certain to see a fall of several tens of tonnes in its harvest (Reuters)

So what will be the mitigating factors that prevent another humanitarian emergency?

“The reason for the mass starvation that occurred in late 90s is that North Korea faced natural disasters without expanding the market’s capability to substitute for the broken planned economy capability, and so the damage to North Korean citizens was inevitably large.”

“The market in North Korea has expanded in the last 10 years. The supply and demand structure of daily necessities, including food items, has been formed.”

“Because the market capacity has expanded, the possibility of a mass-scale starvation occurring is no longer high. In actuality, the change in food prices is being monitored at the market.”

-Dong Yong Seung, the Samsung Economic Research Institute’s Economic Security Team Chief, speaking at the 19th Expert Forum sponsored by the Peace Foundation (Daily NK)

Mr. Dong’s analysis addresses the improved efficiency of DRPK’s market supply chains but does not address the effects of an adverse supply shock. 

The UN seems ready to help, although it has not been asked:

Institutionally, mechanisms are in place in North Korea to ring the international alarm bell before hunger turns into mass starvation. The World Food Program monitors nutrition in 50 counties, and the Kim government has become expert in asking for help.

“The North Koreans know that they are facing a difficult situation and have made it increasingly clear in the past few weeks that they will need outside assistance to meet their growing needs,” the U.N. official said, asking not to be identified because of the sensitivity of the issue.

North Korea, which even with a good harvest still falls about 1 million tonnes, or around 20 percent, short of what it needs to feed its people, relies heavily on aid from China, South Korea and U.N. aid agencies to fill the gap.

The UN official said it was clear from a variety of sources that the food security situation was worsening in North Korea and that it needed to be addressed.

Last month Kwon Tae-jin, an expert on the North’s agriculture sector at the South’s Korea Rural Economic Institute told Reuters that if South Korea and other nations did not send food aid, the North would be faced with a food crisis worse than the one in the 90s.

The U.N. Food and Agriculture Organisation said in late March it sees the North having a shortfall of about 1.66 million tonnes in cereals for the year ending in October 2008.

The North will start to feel the shortage the hardest in the coming months when its meagre stocks of food, already depleted by flooding that hit the country last year, dry up and before the start of its potato harvest in June and July. (Washington Post)

The UNWFP, however, will be under pressure from its donors to monitor food aid and make sure it is not diverted to non-emergency uses.  Under these conditions, it is not likely that they will be asked to provide much aid until a catastrophy is already underway.  So with the UN out of the picture, who is best positioned to prevent the reemergence of a humanitarian crisis in North Korea today? China.  

Despite China’s own food probelms, however, it is always likely to capitulate, at least in part, to North Korea’s emergency requests.  China does not want to deal with another North Korean famine, particularly during the Olympic season, and they certainly do not want to deal with any political instability that could result. 

Yonhap reports that the DPRK has asked the Chinese for 150,000 tons of corn this year.  Chinas says they will give 50,000 tons–and that is just initially. (Yonhap)

UPDATE 4/14/2008: I still have not seen any reports in the media of Noth Korea seeking suport from Russia.

UPDATE 6/9/2008: China increases grain export quota to North Korea to 150,000 tons

(more…)

I just returned home from a screening of the North Korean film, A School Girl’s Diary (ASGD), hosted by James Person at  the  North Korean International Documentation Project (NKIDP) and  Suk-Young Kim from the University of California, Santa Barbara.

Although times have changed significantly in North Korea since the famed Sea of Blood was released, the purpose of the cinematic arts within the North Korean system has not.  In short, film in the DPRK is meant to be regime enhancing—reinforcing official social and political norms.  What is interesting about ASGD compared with previous North Korean films, however, is the muted use of propaganda and tacit admission that things are not perfect in the Workers Paradise.  Is it possible the change in communications tactics is the result of changing attitudes within North Korean society?

Sea of Blood is as subtle as a pulp comic.  It offers action, intense feelings, flat characters (clear protagonist/antagonist), and a simple “us vs. them” plot line.  In the film, Koreans are the victims of brutal Japanese imperialism and Kim il Sung is the savior who delivers them from oppression.  At the time Sea of Blood was released, however, the first generation of revolutionaries was in control of the country, memories of Japanese colonialism were fresh, and people were more enthusiastic about their country’s future.

Today, the North Korean government is struggling to indoctrinate its “third generation (3G).”  The 3Gs have no memories of Japanese colonialism or of the Korean War.  Children, who have likely never met an American, do not hate the “American Imperialists” like their parents and grandparents.  3Gs have seen many state institutions collapse; they have seen the social contract broken; they have seen economic decline; and they have survived a famine.  Additionally, they have grown up buying and selling in markets and are more familiar with South Korean and Chinese culture than their parents could have imagined at their age. 

Given these huge demographic changes, it seems probable that the style of ASGD represents the regime’s most recent efforts to socialize this new generation of comrades.  A School Girl’s Diary makes only one explicit reference to the leader and portrays life as less than ideal.  After sixty years of revolutionary struggle, people fight with each other, express their egos, and feel jealousy. In short, the film portrays characters, locations, and motivations that many contemporary North Koreans could probably identify with.  As was noted in the discussion following the film, Mickey Mouse made a cameo on a backpack (likely imported from China and bought at a market), there was a veiled reference to sex, or lack thereof, and the star of the film complained about her absentee father (the metaphorical Kim Jong il).

You can read a professional review of the film in Variety here.

You can read academic discussion of the film here. (h/t Werner Koidl)

Where do North Koreans get their alcohol?  The Daily NK has the scoop:

North Korean citizens started producing/distributing home-brewed liquor in 1987 after the prohibition of the production and sale of liquor in North Korea was lifted. 

Liquor made in the home of an average North Korean citizen consists of ingredients such as corn or rice and malt. The yeast cultivated from rice powder is combined with porridge prepared from the powder and fermented in a vat. After 12~14 days, the rice porridge and the yeast will produce a chemical reaction and will turn into a thick porridge, which is called “liquor porridge” in North Korea.

Refrigerating the steam from the cultivated liquor porridge and turning it into fluid produces liquor. North Korean citizens enjoy over 40% of alcohol content-liquor and approximately 800ml of liquor is produced from a kilogram of corn. A bottle of liquor (500 ml) is close to the price of a kilogram of corn, so selling liquor made from this produce can bring in a small profit.

Read the full story here:
North Korea’s Inspection of Home-Brewed Wine by the Party
Daily NK
Jung Kwon Ho
4/9/2008

My friend Paul at Knife Tricks recently interviewed the producers of Crossing the Line about the logistics of filming in the DPRK.  Here are some excerpts:

Gordon and his crew brought their own equipment to North Korea because local film technology was not compatible with the needs of a modern documentary shoot. “As far as equipment goes, they film on 35mm, and we were filming on DigiBeta for the first two films and hi-def video for Crossing the Line,” says Gordon.

“I used standard Canon lenses,” notes Bennett. “When I needed to light, I used Kino Flos, but much of the film was shot with available light.” Gordon adds, “In North Korea, the electricity isn’t necessarily on, and when it’s on, it isn’t necessarily constant, so we tried to use available light wherever we could.” He carried batteries at all times and hooked into mains when possible.

In addition to Gordon, Bennett, soundman Stevie Haywood and co-producer Nicholas Bonner, the crew included one or two North Koreans assigned to the shoot by the Ministry of Culture. Gordon notes, “Your immediate suspicion is that they’re government plants — security people pretending to be film people. But the longer you work with people, you tend to find out what they are and what they’re not, and the people we worked with day by day were absolutely film people.”

“They basically took it upon themselves that they were going to work for us and get us the access that we wanted, whatever that took and whatever personal risks that took on their part,” he continues. “Had it all gone wrong, there would have been quite nasty consequences for everyone involved.”

The filmmaking process involved many nights of discussions with the North Koreans about access or other issues concerning the next day’s shooting. The topics to be discussed with Dresnok were provided to the North Koreans in advance, with the understanding that new topics would arise over the course of the interview. The minders occasionally reviewed the dailies. “There was never an occasion when they said, ‘No, you can’t shoot that,’” Bennett recalls. “There were lots of occasions where they’d hem and haw as to whether they wanted us to film something, and we shot it, and they had a look at it afterwards and said, ‘Yeah, it’s fine.’ You’re not always aware of what they’re looking for.”

“No footage was ever taken away from us,” adds Bennett. “We came away with everything we shot.”

The North Koreans had no hand in the edit, either. Gordon says the final cut was not shown to North Korean officials until after it was screened at the Busan Film Festival in South Korea.

Read the full article here:
Documentary filmmakers are granted rare access to shoot a project that provides glimpses of life in the closed-off society.
American Cinematographer
Paul Karl Lukacs
March 2008

Daily NK
Moon Sung Hwee
4/8/2008

April 8th is Postal Service Day in North Korea. Each province has a branch office of the Ministry of Posts and Telecommunications and Communication Maintenance Bureau. The postal system manages the distribution of letters, telegrams, telephone calls, TV broadcasts, newspapers and magazines. Additionally, they mint stamps and also operate an insurance agency in name only.

In the late 1990s, the national postal system was completely ruined

In North Korea, postal service offices are set up in each “ri”—a small village unit–, of each county to deliver letters, parcel posts and telegrams. Following the March of Tribulation in the late 1990s, the delivery system was completely destroyed and its formal structure was left in tatters. Even in the 1980s when the North Korean economy and people’s lives were relatively stable, it took around 15 days to two months on average to deliver a letter from Pyongyang to a rural village.

In the case of a telegram, it took generally 3 or 4 days to reach a postal office in a rural area. In the late 1980s, to guarantee efficiency within the telegram delivery system, the authorities supplied the offices with second-hand bicycles from Japan.

After the March of Tribulation, letters disappeared due to train delays and frequent blackouts, and the telegram service was virtually incapacitated due to the lack of electricity.

Telephones were restricted to control the outflow of national secrets

North Korea uses a separate electricity supply for its telephone system. Even if there is a power blackout in a village, villagers can still use the telephone network. In 1993, fiber-optic cables were installed and the use of mail and telegram services began to decline. North Korean people call fiber optic cable a “light telephone.”

North Korea built an automatic telecommunicates system by developing multi-communication technology with imports of machinery and by inviting engineers from China in 1998.

In 2003, authorities allowed cadres to use telephones in their houses and in 2005, they also allowed people to use the telephone at home as long as they paid 2,000 North Korean won (approx. USD0.6) a month (a monthly salary is 1,500 won per laborer).

In August, 2007, the government tightened regulations regarding the telephone system. People could make calls only within their province. Authorities said the reason was to prevent the outflow of national secrets.

The Ministry of Posts and Telecommunications controls TV and other broadcasting. There is no cable TV in North Korea. Authorities set up an ultra-short wave relay station in each county to relay television broadcasts.

North Korea signed a contract with Thailand for satellite broadcasting and installed U.S.-made transmission and relay facilities in 2000.

People can now listen to “Chosun Central Broadcasting,” but in rural areas, it is difficult to recieve signals because the broadcasting facilities and cables have already begun to deteriorate.

People sarcastically say a “newspaper is not about news but about “olds.” The authorities pay special attention to the successful delivery of the Workers Party Rodong Shinmun bulletin. To deliver Rodong Shinmun from Pyongyang to each province or even to each city and county by train, it normally takes 4-5 days. Sometimes, it takes more than a week.

People also say they use an “oral-paper” to get information because rumors are faster than the Rodong Shinmun.

Postal service workers were dragged to prison camps

In 1992, the Minister and all related officials of Posts and Telecommunications were fired, and the Minister, the Vice Minister and their families were sent to political prison camps for having wasted national finances for the import of factory machinery to produce fiber-optic cables from the U.K.

They submitted a proposal to Kim Jong Il to buy factory machines in order to earn foreign currency through the production and export of fiber optic cables. However, in the end they eventually bought worn-out machines from the U.K. and failed to earn profits. In addition, they embezzled some of the funds.

In 2001, in Lee Myung Soo Workers-District of Samjiyeon, Yangkang Province, two office workers and a manager of a relay station broadcasted Chinese TV programs that they were watching to residents by mistake, so they were sent to a political prison camp and their families were expelled to a collective farm.

Agents of the National Security Agency are stationed at the Ministry of Posts and Telecommunications in order to scrutinize mail, parcels, to tap telephone wires and to supervise residents.

The Ministry regularly dispatches professional engineers to the 27th Bureau, to the airwaves-monitoring station, and to the 12th Bureau, which was newly established to censor mobile phones.

On Postal Service Day, Chosun Central Agency often delivers praise for the development of North Korea’s postal system and facilities under the General’s direction.

However, most ordinary citizens will not be able to watch or read about it in time, for the lack of paper, electricity, infrastructure, and delivery systems.