Archive for the ‘International Governments’ Category

March, 2021: what to make of the rise in North Korea-China trade?

Tuesday, April 20th, 2021

By: Benjamin Katzeff Silberstein

According to Chinese customs data, Chinese exports to North Korea increased by 400 times in March, compared to the combined shipments in January and February of this year. As South China Morning Post reports:

Trade between China and North Korea grew to a six-month high in March, figures from Chinese customs show in the latest sign that the two neighbours are easing border restrictions amid tensions with the United States.

Exports from China to North Korea jumped from a paltry US$3,000 in February to US$12.98 million in March, according to Chinese customs data released on Sunday.

That was nearly 400 times more than the US$33,000 combined shipment of January and February, and was the highest by value since September, when China recorded outbound shipments valued at US$18.88 million to the isolated neighbour. Pyongyang imposed strict controls on goods transport ahead of the 75th anniversary of the founding of the ruling Workers’ Party in October.

According to Chinese customs, China imported US$1.308 million of North Korean goods in March, compared with US$1.75 million in February.

(Source: Laura Zhou (and Reuters), “China-North Korea trade jumps after pandemic slump but sanctions curb business with Pyongyang,” South China Morning Post, April 19th, 2021.)

What to make of this?

It could, of course, be the start of a trend reversal from the past year’s catastrophically low trade figures. Perhaps the North Korean government has begun to let up on border restrictions. In the past few weeks, news reports have said that China plans on restarting trade and open the new bridge between Sinuiju and Dandong. NK News has found evidence of new disinfection centers for goods on the North Korean side in April. The Russian ambassador to North Korea also recently said in an interview that trade will restart soon.

At the same time, I’m not sure these figures themselves give evidence of resumed trade. They could be a mere glitch in the data caused by a change in accounting routines or the like. Just look at the reported figure for Chinese exports to North Korea in February: $3,000. It simply isn’t realistic. Perhaps a portion of that month’s trade was recorded instead for March for reasons related to payments or contracts. China, moreover, ships much more goods to North Korea than what’s officially recorded as “trade”.

As so often, we will simply have to wait and see. When Chinese data is published on the specific items traded, we should also get a better sense of what this trade upswing really means.

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Kim Jong-un’s claim of the “worst-ever situation”

Sunday, April 18th, 2021

By: Benjamin Katzeff Silberstein

Perhaps I am late to the game already (the long weekend here in Israel is to blame for that), but it has been puzzling to see the media reporting on Kim Jong-un’s claim that North Korea faces its “worst-ever” economic situation at the moment, under both international sanctions and a self-imposed border lockdown.

It seems that Kim’s words have been misinterpreted or lost in translation. Colleagues at 38 North have rightly and importantly pointed out that the original Korean-language statement is not nearly as drastic. This is often the case with KCNA articles and translated statements from North Korea:

In the vernacular report, however, this term read kuknanhan (극난한), which would be better translated as “very hard” or even “extremely difficult.”[2] North Korea’s English-language media sometimes omit passages or provide translations that are different from the vernacular text, and without analyzing years’ worth of data, it is impossible to conclude whether they do so deliberately, or if they are simply oversights.

It is clear, however, that Kim did not say “the worst-ever situation” at this event. Even if he had, the North Korean leader has made similar remarks in connection with the country’s current circumstances in recent months. For example, Kim’s opening address at the Eighth Party Congress in January referred to the past five years as a period of “unprecedented, worst-ever trials.”

None of this means that the situation is not bad. But “worst-ever” would be extremely drastic for a country where the failings of the economic system led to a famine in the 1990s and early 2000s that took the lives of between 600,000-1.5 million people. Today’s conditions simply aren’t grave enough to warrant such comparisons.

Precisely how difficult conditions are remains hard to tell. The Russian ambassador to North Korea recently gave an interview where he said that the country’s food situation is not at all catastrophic, and that there are no signs suggesting an ongoing famine. He is probably right, but at the same time, we should be careful not to extrapolate too much about the situation in the provinces, for example, based on an assessment of the store shelves in Pyongyang. The country’s society is highly stratified and its economy relatively fragmented. The situation in one locality may well be much more dire than in another.

At the same time, we should also be careful not to take Kim Jong-un at his word. What, except for Kim’s own statement, suggests that today’s situation is worse than the one in 1995, after both economic collapse and heavy flooding took a severe toll on the economy? Sure, things are incredibly messy right now, a view that both circumstances and data support. Kim’s own statement, not least, is another solid data point showing just how grim things appear to be. But famine, meaning large numbers of people dying from starvation or malnourishment, is simply a different dimensions. Let us hope that North Korea does not get there, neither now nor in the future.

There are reasons to believe that it will not. The market system, for its faults and flaws, is able to react to changes in supply and demand, unlike the state distribution system in the 1990s. Moreover, China would likely step in with serious quantities of food aid if the situation got truly disastrous. Many signs suggest that North Korea and China expect to resume and even expand trade in the short-term. Should a drastic need arise, China would likely increase humanitarian shipments as well, although it is far from certain.

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More news on trade potentially resuming between North Korea and China

Thursday, April 1st, 2021

By: Benjamin Katzeff Silberstein

Media outlets with sources inside North Korea, such as Daily NK, have reported for some weeks that trade might be restarting between China and North Korea. Daily NK reported in February that the USD-KRW rate began to climb after the 8th Party Congress amid rumors of the border opening again. Now, Nikkei Asia reports, based on anonymous sources in the Chinese border region, that preparations are being made to restart trade:

“I heard that North Korea is planning to accept Chinese goods from mid-April,” a Chinese man in his 30s at a trading company in Dandong, a city across the Yalu River from North Korea, told Nikkei. He said the information came from the North Korean side and he was preparing to restart his business.

A number of other trading companies also confirmed that bilateral trade is expected to resume in April.

At first, goods will only travel between Dandong and Sinuiju in North Korea, by rail over the Sino-Korean Friendship Bridge, which is the main route of trade between the two countries.

In Sinuiju, COVID-19 testing sites are being prepared. All being well, transport by ship and trucks will also be resumed.

North Korea needs medicines to treat diabetes, infections and other diseases, said a person familiar with the matter. “Bilateral trade” is in fact Chinese aid to North Korea, the source said. Sources also say that North Korea is asking for chemical fertilizers as the spring seeding season approaches.

In late January 2020, North Korea suspended flight and rail services from China and Russia to prevent coronavirus contagion. Overseas visitors were banned and goods restricted.

Pyongyang partially eased transport restrictions in May last year but reimposed them in October due to another wave of infections in China. Trade by road, rail and sea have almost entirely been suspended.

Meanwhile, a new bridge over the Yalu River is about to open. On March 9, the provincial government of Liaoning in China announced invitations for the tender of safety inspections for the New Yalu River Bridge, saying in those documents that the crossing would soon be open.

(Full article and source: Shin Watanabe and Tsukasa Hadano, “China and North Korea to revive trade in April amid US tension,” Nikkei Asia, March 30th, 2021.)

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China delivers oil to North Korea, stabilizing fuel prices

Tuesday, March 2nd, 2021

Benjamin Katzeff Silberstein

On the supply side, fuel prices in North Korea are largely a factor of deliveries from China, as I have shown in a 38 North report. Daily NK confirmed this pattern in a dispatch last month:

Oil prices in North Korea plummeted late last month after climbing at the start of the year. North Korea has reportedly been receiving supplies of oil from China as the two nations show signs of growing closer.

The price of diesel was KPW 3,500 in Pyongyang, KPW 6,000 in Sinuiju and KPW 6,300 in Hyesan as of Jan. 25. This was respectively 56%, 24% and 23% less than it was on Jan. 11, as determined by Daily NK.

The price of oil, on which North Korea completely depends on imports, fluctuates relatively wildly depending on supply. Even so, this was a 23-56% fall in just two weeks.

Particularly in the case of Pyongyang, the price of diesel fell to KPW 3,500, the first time it has done so since 2011, a decade ago.

Gasoline prices fell relatively less than diesel. Gasoline was KPW 10,000 a kilogram in Pyongyang, KPW 11,000 in Sinuiju and KPW 12,000 in Hyesan as of Jan. 11. As of Jan. 25, it was KPW 6,700 in Pyongyang, KPW 11,000 in Sinuiju and KPW 11,100 in Hyesan.

As in the case with diesel, the price drop for gasoline was most pronounced in Pyongyang, where prices fell 33% from Jan. 11.

In Hyesan, however, gasoline prices fell just 7.5% from two weeks earlier, and in Sinuiju they did not change at all.

Diesel prices fell more than gasoline prices because the new supplies from China reportedly focused on diesel.

According to a source, diesel accounted for a large share of the imports smuggled into North Korea by way of illegal transhipment in international waters from ships leaving the Chinese port of Dalian in Liaoning Province.

The source claims North Korea has smuggled oil from China “countless times” since the middle of last month.

Prices fell most precipitously in Pyongyang seemingly because the capital received not only the first supplies but also the most.

(Source and full article: Jang Seul Gi, “North Korea appears to have received supplies of oil from China,” Daily NK, February 4th, 2021.)

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Continuity and change in North Korea-China relations

Tuesday, February 23rd, 2021

By: Benjamin Katzeff Silberstein

The recent appointment of Ri Ryong Nam as North Korea’s ambassador to China hints at ambitions for greater economic exchange with China, as reported here. As Ri has a strong background in institutions in North Korea related to foreign trade, not least as the country’s trade minister and, later, vice premier in the country’s cabinet.

Above all, the appointment of Ri is interesting as a sign of continuity rather than change in North Korea’s external economic relations. At the moment, cross-border trade is in its deepest lull in many, many years, as a result of the North Korean government’s self-imposed border shutdown to protect against Covid-19. This border shutdown came on top of already harsh and heavy sanctions.

But this border shutdown, like other measures around the world related to Covid-19, has an expiration date. There’s been rife speculation that the border may reopen soon. And when it does, business will likely, at some point, return to the old normal of China being North Korea’s only meaningful source of economic exchange. The appointment of Ri is one data point to suggest this, but there are many other data points that show an increasingly close relationship between China and North Korea since 2018, after a lull in the preceding years of frequent North Korean missile tests and other destabilizing action. For example, North Korea and China and started expanding 12 of its 13 road or rail crossings only in 2020, despite the pandemic.

While all this may only amount to business as usual, it is interesting and noteworthy for several reasons. For one, North Korea’s previous five-year economic strategy, launched in 2016 and subsequently abandoned, reportedly sought trade diversification away from China as one of its main objectives. North Korean publications have long lamented overt dependence on one single country for foreign trade, noting that it easily translates to political dependance as well.

At the same time, North Korea’s trade dependence on China has actually increased over the past few years. Xi Jinping has long since promised Kim Jong-un that China would fund cross-border infrastructure refurbishment and special economic zones along the border. For all the talk of the potential for economic exchange between North and South Korea back in the heyday of inter-Korean diplomacy between Moon and Kim, the fact remains that if any party is likely to expand its economic ties and influence in North Korea, it’s China.

So the recent appointment of Ri as ambassador to China should be seen as a sign of continuity, not change. Given the dire state of the economy, and the economic policy retrenchment drive as of late, North Korean policymakers are likely to stay cautious and safe in economic measures for some time to come. That is precisely the sort of move that strengthening ties and trade with China would be.

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Fertilizer factory shutdown and goods shortages

Monday, February 8th, 2021

Benjamin Katzeff Silberstein

KITA has a new briefing paper out about some developments relating to North Korea’s domestic economy and external trade. If true, the shutdown of the Namhung Youth Chemical Complex (청년화학연합기업소) is one of several examples of how the border shutdown due to Covid-19 is hurting basic industries through a shortage of spare parts. Goods such as cooking oil are also reportedly in short supply on the markets, and local government incomes from market stall fees are also reportedly dropping. As always with this sort of information, none of it is fully confirmed.

You can find the report here (in Korean), below is an excerpt from a summary by Nikkei:

The Namhung Youth Chemical Complex, north of Pyongyang, produces fertilizer and coal gas using anthracite mined in the area. North Korean leader Kim Jong Un visited the site in 2013.

High-pressure valves and jet sprays at the complex have become too worn for continued use, according to reports the Korea International Trade Association received from North Korea in January. Without replacement parts, it is unclear when the plant can resume work.

The suspension hinders North Korea’s push to lift its meager agricultural output. Kim last year ordered a boost in fertilizer production and attended a completion ceremony for a separate fertilizer plant. Coal gas also serves as a valuable industrial energy source for the country, which faces an oil embargo in response to its nuclear and missile testing.

[…]

The resulting shortages also have struck North Korea’s jangmadang informal markets, which have flourished under Kim’s tenure. At one market in the city of Pyongsong, the volume of available flour and cooking oil has halved. Many stalls that used to sell Chinese-made apparel and appliances have shut down as well.

The slowdown of the jangmadang is eating into the coffers of North Korea’s regional authorities. South Pyongan Province, home of the Namhung plant, made about half as much from overseeing these markets in the last quarter of 2020 as in the year-ago period, heavily impacting provincial spending, the KITA report says.

(Source: Yosuke Onchi, “Key North Korea factory shuts down from COVID-19 parts shortage,” Nikkei Asia, February 8th, 2021.)

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Kim Jong-un’s congress speech: strengthening state control over the economy

Tuesday, January 12th, 2021

By: Benjamin Katzeff Silberstein

Unfortunately, North Korean state media has not been as forthcoming with coverage of the congress contents as they were on the first day. They did, however, release a summary of Kim Jong-un’s nine-hour long report to the congress. Presumably, Kim’s report contained much greater levels of detail than the (still very long) report summary put out by KCNA on January 9th.

In this post, I try to summarize the most significant parts of the speech where Kim deals with the economy. Such content is plentiful, but as so often in these speeches, many words are used to say very little.

The bottom-line message is clear, however: state control over the economy is increasing and will continue to tighten. What exactly this means in practice is unclear, but we have seen some very troubling examples as of late, such as the reported executions of foreign currency traders, clear signs of strengthened control over foreign currency market rates, attempts by the state to take control over semi-private corporate operations, among many other examples. And let’s not forget all the anti-corruption campaigns. While fighting corruption is undoubtedly a good thing, in the current North Korean context, it often likely means finding cash earned through semi-legal or illegal private economic activity and hidden from the state.

Indeeed, Kim’s report is abundantly clear in stating that he (or, the collective consensus of the North Korean policymakers with the most clout at present, of which Kim is obviously the most powerful) wants the state to be the main planner and decision-maker not just over the general direction of the economy, but on a much more detailed level than that. As others have pointed out, the anti-covid-19-measures may at least in part be the results of anti-market policymakers in the state apparatus using the current situation to push their agenda. Sentences such as the following are particularly concerning: “It is imperative to improve planning and make proper use of the economic leverages including financial, monetary and price administration so as to ensure rational management of the economy.” Price administration requires a level of economic governance by the state which suggests that the policy direction is hardly about merely setting interest rates and making some public investments.

None of this is happening in a vacuum. Overall, since Kim came to power, there’s been a general push to assert state control not just over the economy, but society overall. Border control has strengthened, as evidenced by the dwindling number of defections. Campaigns against consumption of foreign media have seen a significant uptick although, of course, they were always more or less in force in the country. The speech seems to hint at this too, with passages about enhancing the quality of domestic media, which may be an attempt to compete more strongly with the smuggled foreign culture that the regime considers ideologically poisonous. In any case, taking control over the economy is a natural, and perhaps the most central, part of social and political control overall.

For those hoping that North Korea will go in a direction of looser social and economic control by the state, the congress report does not make for joyful reading. The clippings below are only a small fragment of the gargantuan text, I’ve done my best to curate what I consider to be the most interesting and important parts and annotated some of them. My own emphasis in bold:

Although economic construction failed to hit the expected strategic goals, a precious foundation for making sustained economic development by our own efforts was provided, the report said, adding: The greatest of such successes is that the backbone of the self-supporting national economy, the socialist economy, which is the material basis of the existence and lifeline of our own style of socialism, was maintained and its arteries were preserved.

Kim has made similar admissions of failure in the past, so in my opinion, media headlines framing this as unique have been off the mark. In any case, the full message seems to be: things have been bad, little progress made, but at least we didn’t budge on core principles and reform our system.

The Party Central Committee built up new potentials for readjusting and developing the overall economy by taking revolutionary measures for strengthening the unified guidance and strategic management of the state over economic work and making sure that the socialist principles were thoroughly observed in the economic field.

So, some measures taken for enhanced state control, but many remain.

By prioritizing the long-standing and special DPRK-China relations, our Party developed the friendly relations with China as required by the new century and opened a new chapter in the DPRK-China relations of friendship with socialism as its core, the report stressed.

The Party Central Committee strengthened strategic communication, promoted mutual understanding and deepened comradely trust between the two Parties through five rounds of the DPRK-China summit talks and thus provided a firm guarantee for fresh development of the DPRK-China relations as demanded by the times that required continuity in the fraternal ties and unity between the Parties and peoples of the two countries which are inseparably bound up with each other in the struggle for their common cause.

Attaching importance to the fresh development of the traditional DPRK-Russia relations, the Party Central Committee also conducted external activities for the development of friendly and cooperative relations between the two countries, in the course of which it laid a cornerstone for the expansion of friendly relations with Russia.

These passages are interesting not so much because of their substance, but because an explicit goal of the last five-year plan, according to leaks, was to diversify its trade away from near-total reliance on China, and expand trade with Russia in particular. There is no hint of that goal in the report summary.

The report said that due to such obstacles, state investment and supplies intended to bolster the major economic sectors in the five-year strategy for the national economic development could not be carried out properly.

It made an analysis and appraisal of the Party Central Committee on the cause of non-fulfillment of the five-year strategy for the national economic development during the period under review, seriously pointing out that it could not but draw a conclusion that if one ascribes its failure to objective conditions, he can do nothing and the action and role of the driving force will be unnecessary, and it is impossible to accelerate the revolutionary struggle and construction work unless the unfavourable external factors are removed.

The Party Central Committee analysed the current situation, in which the 5-year strategy for national economic development had not been properly set on the basis of scientific calculation and grounds, science and technology failed to actually play the role of propelling the economic work of the country and the work of readjusting and reinforcing the irrational economic work system and discipline was not properly done.

The report referred to the conclusive lesson that the economy of the country can never be boosted without breaking with the wrong ideological viewpoint, irresponsible working attitude, incompetence and obsolete working manner that have been prevalent so far.

In other words: state officials and managers shouldn’t be content with blaming the external environment, the poor performance of the economy is still their fault, because they were not ideologically convinced enough. It is a convenient conclusion to draw for policymakers who want to avoid serious reform at all costs.

The new five-year plan mainly presupposes that the Cabinet, as the economic headquarters of the country, properly enforces the Cabinet-responsibility system, Cabinet-centred system, for economic work, vigorously accelerates the work of strengthening the essential lifeline and integrity of the country’s economy, definitely improves its economic management, actively promotes the normalization of production, renovation and local provision of raw and other materials by dint of science and technology and orientates the external economic activities toward reinforcing the foundations and potentiality of the self-supporting economy.

And the new plan reflects the demands for perfecting the self-supporting structure of the national economy, lowering the proportion of dependence on imports and stabilizing the people’s living by taking the actual possibilities into consideration.

The main seed and theme of the plan are, as always, self-reliance and self-sufficiency.

[…]

It was noted that in order to attain the goal of iron and steel production mentioned in the new five-year plan, scientific and technological problems must be solved to expand production capacity by renovating the existing production lines with advanced technology and building new energy-saving iron blast furnaces in major iron works and steel plants, to invigorate the production of iron ore and to use brown coal in the northern areas for the production of pig iron.

The report also referred to the direction of the development of the core industry of the country, the chemical industry, which can be likened to the lifeline for the construction of the self-supporting economy and the improvement of people’s standard of living.

It is unclear precisely how the state intends to use such increased production. With regards to the chemical industry, it likely has to do with manufacturing fertilizers and liquified coal, to replace expensive oil imports. 

It put an emphasis on important issues for developing the coal industry, an outpost for the development of the self-supporting economy.

Referred to were the issues of boldly unfolding and powerfully propelling the work of intensively supplying equipment, materials, labour and funds to the coal industry, securing more coalfaces by giving precedence to prospecting and tunnelling in the coal industry, putting efforts into the development of the soft coal industry, pushing forward the work of improving the working and living conditions of coal miners as a priority task for increased coal production and taking measures for the effective use of coal.

The report defined the machine industry as an important sector leading and hauling the overall economic sectors, and set forth the immediate orientation of its development after examining the present situation facing the machine industry of the country and its causes.

The basic task facing the machine industry during the new five-year plan period is to make it an industry with solid foundations and switch to a development- and creation-oriented industry.

The machine industry should positively develop and produce modern and high-performance machine products including machine tools, vehicles, building machines, electric machines, mining machines and hydraulic machines.

The report stressed the need to attach importance to the mining industry and shore it up for the sake of the normal development of the national economy.

Many of the goods mentioned here are North Korea’s most central export commodities. They are hardly useless for domestic purposes, but will of course generate much less revenue than if exported.

The basic tasks facing the construction field during the new five-year plan period is to massively carry out the capital construction including housing construction so as to provide the people with a higher civilized living conditions and radically change the appearances of the country.

The construction field should powerfully push forward the two fronts simultaneously−industrial construction for strengthening the economic foundations of the country and construction for meeting the material and cultural needs of the people.

By concentrating efforts on the construction of 50 000 flats in Pyongyang, it should set the annual plans for building 10 000 flats every year, starting from this year, scrupulously organize the construction operation and guidance for implementing the plans and thus basically settle the issue of dwelling houses for the Pyongyang citizens.

25 000 houses should be built in the Komdok area, a leading nonferrous mineral producer where a large contingent of workers live, and thus build it into a mining city with no comparison in the world.

[…]

The field should step up technical updating of its infrastructure and turn mobile communications into a next-generation one as early as possible by developing the relevant technology.

It is needed to readjust the wire broadcasting and cable TV networks, put the relevant technology on a higher level and provide full conditions for the people in all parts of the country, ranging from cities to remote mountain villages, to enjoy a better cultural and emotional life.

This is a very interesting part of the speech which has received little or no attention. The message seems clear: the state has to improve TV programming to compete with the ideologically contaminated competition coming in from abroad, mainly in the form of South Korean TV dramas.

The report raised it as a very urgent issue at present to develop the state-run commerce and preserve the socialist nature of public catering and welfare service, and set forth the tasks for restoring our commerce, true to its name, to public service activities for supporting the people’s life and promoting their material well-being.

The important tasks to be carried out by our commerce without fail at present is to restore the state’s leading role and control in the overall commerce service activities and preserve the nature of socialist commerce of serving the people.

Commercial service units should put their service activities on a people-oriented, cultural, modern and diversified basis with a correct management strategy, and thus create a new socialist service culture of our own style.

[…]

The report underscored the need to tighten discipline in ensuring unified guidance of the state in the economic work, strengthen the national system of unified statistics, launch a proper project for boosting the mainstay of the national economy, and improve the conditions of industrial establishments to carry on their management activities.

Productive forces should be redistributed in a reasonable way so that economic efficiency may increase in the whole realm of the national economy, weak links in the chain of each economic sector identified, and the sectors that are essential for balanced development of the economy reinforced.

It is imperative to improve planning and make proper use of the economic leverages including financial, monetary and price administration so as to ensure rational management of the economy.

The scientific analysis and clear policies the report put forth with regard to the prevailing situation of the major economic sectors and their readjustment and development serve as a powerful weapon of practical importance in consolidating the material and technical foundations of the self-supporting economy and propelling economic construction in a planned and stable way irrespective of the change in the external environment.

Again, as mentioned in the intro to this post, this is all very traditional rhetoric and worryingly so. A very, very far cry from the early days of Kim Jong-un’s rule, when policy experimentation and limited liberalization moves of that time.

The long-term objective for rural construction is to eliminate disparities between the working class and the peasantry, the gaps between industry and agriculture and differences between the urban and rural areas by pushing ahead with the three revolutions in the rural areas and thoroughly implementing the thesis on the socialist rural question; and the immediate task is to give precedence to the work of transforming agricultural workers on a revolutionary and working class pattern, boost state support to the rural areas and build up the rural communities in a balanced way so that they have regional characteristics of their own.

This is pretty standard rhetoric, but it is incoherent given the consistent prioritizing of Pyongyang for prestige projects and the like. The same text even continues to push this priority with promises of new housing construction in Pyongyang.

Mentioned in the report was a task for city and county Party committees and people’s committees to become a powerful engine propelling the development of their regions, master of the local economy and administrator responsible for the livelihood of the people in their regions.

In other words, stronger local government control over economic affairs.

The report also made serious analysis of the work in the field of art and literature, and set forth tasks for ushering a new era of efflorescence of Juche-oriented art and literature by effecting a radical turn on all fronts of art and literature.

Creation guidance officials, creators and artistes in the field of art and literature should display an enterprising working spirit with high discernment to produce good works embodying the Juche character, national identity and modernity, stage characteristic performances, and purposefully carry out the training of reserves on a long-term basis by establishing a proper system and setting development strategy and clear goals.

Tasks were set forth for the mass media to raise the fierce flames of a new revolution in newspapers, news services, radio and TV broadcasting and publishing as required by the new period of drastic change and upsurge in socialist construction so as to wage a vigorous media campaign aimed at deeply instilling into all the people the core of the ideas, lines and policies of the Party Congress and inspiring them to the implementation of the decisions of the Party Congress, and for the field of physical culture and sports to redouble efforts for making our country join the ranks of advanced sports nations in line with the prestige and position of our dignified state.

The innovative orientations for building socialist culture are a reflection of the grandiose plan for creating a new, Korean style of civilization by bringing about a great revolution in all sectors of socialist culture with the successes, experiences, mistakes and lessons gained in the period under review as a springboard for advance and leap forward.

The report put an emphasis on effecting a revolutionary change in the mental and moral life of the people by pushing ahead with the eradication of non-socialist, anti-socialist practices and thorough establishment of the socialist lifestyle throughout the country as an undertaking involving the whole Party, state and society.

All the people should create and develop a noble and civilized new life of our own style and conduct a powerful mass campaign against the practices running counter to the socialist lifestyle, deeply bearing in mind the faith in socialism and love for and trust in things of their own.

Again, a similar theme to above, namely, improving cultural production — implicitly to compete with the inflows of foreign culture and its problematic ideological influence.

The report underscored the need to strengthen the people-oriented nature of the state befitting the intrinsic character of our style of socialist system, realize its unified, scientific and strategic control and thoroughly establish a revolutionary spirit of law observance throughout society as required by the building of a socialist rule-of-law state, and called on judicial, procuratorial, public and state security organs to fulfill their sacred mission and duty they have assumed for defending the system, policy and people as reliable defenders of the socialist system.

[…]

The Supreme Leader in his report put forward the important tasks for strengthening the working people’s organizations, the links between the Party and the masses and its fringe organizations, into powerful political ones, powerful forces for building socialism.

The report stressed the need for the working people’s organizations to hold fast to their internal work in line with their duty as organizations in charge of ideological education to firmly arm all their members with the Party’s revolutionary ideas and, in particular, the need to prepare the youth league as a reliable successor to and reserve of the Party.

[…]

It clarified it as the first task to attach primary importance to establishing the monolithic leadership system and further develop it.

As mentioned in the report the Party organizations and officials should ensure the absolute authority of the Party Central Committee always and everywhere and staunchly safeguard it. And they should never tolerate or connive at even the slightest tendency to undermine the authority of the Party Central Committee, but wage uncompromising struggle against it.

They should consistently push forward with the efforts to defend and glorify the Party’s leadership feats, particularly give a facelift to the units associated with the leadership exploits and the ones inspected by the great leaders, and ensure that they become the model units in carrying out the Party policies.

Party organizations should scrupulously organize the work to carry out the Party policies, learn in detail about how it is done, and review it, so as to thoroughly implement the policies.

To cement the single-minded unity of the Party and the revolutionary ranks in every way by doing the Party’s internal work effectively was raised as an important task in the report.

[…]

The report stressed once again that abuse of power, bureaucracy, irregularities and corruption are what the Party must most strictly guard against and its primary struggle target at present, and that Party organizations should carry on an uncompromising struggle against even any iota of them.

Calling for thoroughly establishing the revolutionary discipline of intensifying criticism, ideological struggle and study and of working according to functions, the report stressed that it is a way of improving the Party work to decisively improve the level and ability of the Party officials.

These last few paragraphs are perhaps not directly related to the economy, but they do emphasize the push under Kim for tightened discipline and ideological-political control.

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North Korea’s economic growth in 2019

Monday, December 28th, 2020

By Benjamin Katzeff Silberstein

‘Tis the season for South Korean government estimates on North Korea’s economic growth… Maeil Business News

The North Korean economy grew for the first time in three years in 2019 following a sharp contraction in the previous two years, but its per capita income gap with South Korea widened further, the South Korean government data found.

According to a report released by Statistics Korea on Monday, the nominal gross domestic production (GDP) in North Korea rose 0.4 percent last year from the previous year to 35.3 trillion won ($32.2 billion). The growth came after the economy had shrunk 3.5 percent in 2017 and 4.1 percent in 2018 due to the poor crop yields and strengthened international sanctions.

South Korea’s nominal GDP in 2019 was 1,919 trillion won, 54 times greater than that of the North.

The statistics bureau said the increased output from construction, agriculture, forestry and fisheries and service sectors contributed to the overall economic growth of the reclusive regime.

North Korea’s per capita gross national income (GNI) was 1.41 million won last year, losing 20,000 won from 2018. It was one twenty-seventh of South Korea’s 37.44 million won. The per capita income gap between South and North Korea widened from 21 times in 2009, 23 times in 2015 and 26 times in 2018.

Crop yields in North Korea came at 4.64 million tons in 2019, higher than 4.38 million tons in the South. But the North’s rice output was 2.24 million tons, about 60 percent of that of the South.

Coal production increased 11.8 percent on year to 20.21 million tons last year.

North Korea’s trade volume totaled $3.24 billion in 2019, up 14.1 percent from the previous year when its trade shriveled 48.8 percent due to the United Nation’s sanctions.

Watches and watch components that are not subject to the sanctions accounted for the biggest share of 17.8 percent of its total exports, up 57.9 percent from the previous year.

Its biggest imports were mineral fuel and oil that took up 11.7 percent. Amid food shortage, grain imports soared 242 percent on year.

(Source: Choi Mira, “North Korean economy grows for first time in 3 years, per capita income falls in 2019,” Maeil Business News, December 28th, 2020.)

A few thoughts:

First of all, these are estimates based on models, not on rigorously gathered statistical data. That is not to criticize the statistical authorities that compile these figures, but it must be mentioned. These may well be the best estimates out there.

Second, a 0.4% growth is not much, especially considering the steep economic fall North Korea went through in the preceding years. News headlines tend to blow these figures up way beyond proportion.

Third, 0.4% does sound like a plausible number in many ways. Some of the metrics used to determine it may well be indicative of other things. Take increased coal production, for example. We know with a fair degree of certainty that (illicit) coal exports to China seem to have increased significantly during 2019, as well as during the present year. So an almost 12% increase in production compared to 2018 is not at all difficult to imagine.

So all in all perhaps a small uptick in 2019, but at the same time, from a very low level.

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North Korea’s Kumgang plans

Monday, December 21st, 2020

By: Benjamin Katzeff Silberstein

Kim Tok Hun, the North Korean premier, visited the Mt Kumgang Tourism Zone on Sunday December 20th, 2020. KCNA:

He called for pushing ahead with the development project of turning Mt Kumgang area into modern and all-inclusive international tourist and cultural area under yearly and phased plans and thoroughly maintaining the principle of conveniences and architectural beauty first in the construction so that people can fully enjoy natural beauty.

He stressed the need to build the tourist area our own way in which national character and modernity are combined while in good harmony with the natural scenery of the diamond mountain so as to turn the famous mountain of the nation into the one well-known for serving the people and a cultural resort envied by the whole world.

(Source: “Kim Tok Hun Learns about Development of Mt Kumgang Tourist Area,” Korean Central News Agency, 20/12/2020.)

Why pay attention to the tourism industry in the middle of a global pandemic? It may seem odd, but in fact, it follows along the same pattern as many other North Korean pronouncements on economic policy through the year. Consider, for example, Kim Jong-un’s many dressing-downs of industrial managers, who can scarcely be personally blamed for the poor state of the economy. The government knows that the pandemic will be over one day, and is attempting to lay the groundwork for when that happens. Tourism has been a key focus of Kim Jong-un’s economic policy, and the pandemic itself has not changed this.

What does this tell us about North Korean plans for Mt Kumgang? The statement itself does not give any hints of a change in policy direction, but the word “international” above is perhaps noteworthy. North Korea has made clear for some time that it does not intend to involve the South Korean government in plans to develop Mt Kumgang. Rather, it seeks to have tourists come from other neighboring countries, and South Koreans will of course be welcome, depending on how relations between the countries evolve, but not in running the zone. Perhaps the word choice seeks to emphasize this direction.

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North Korean coal trade: the questions that really matter

Tuesday, December 8th, 2020

By: Benjamin Katzeff Silberstein

I have long argued, on this blog and elsewhere, that the question of North Korea and economic sanctions is not a binary one. We don’t have either perfect sanctions implementation with complete suppression of trade, or smuggling and trade under the radar, with or without the complicity of the Chinese government, making sanctions on North Korea meaningless. Rather, sanctions were never going to work perfectly to begin with — government measures rarely do. What sanctions do do, however, is to impose high additional costs to anyone trading with North Korea. North Korea would still import and export sanctioned goods to some extent, but reap lower revenues from exports and pay more for imports.

US intelligence claims over the past few months have contained some information that is highly relevant to that end. Ship-to-ship (STS) transfers are complicated and expensive, but it seems that this method of transferring North Korean coal to Chinese buyers has begun to decrease. Wall Street Journal reports (paywall) that direct deliveries to China, through the Ningbo-Zhoushan area, have increased in frequency over the past few months. Chinese ships have also gone directly to North Korea’s Nampo port to fetch coal deliveries.

The UN Panel of Experts noted this trend already in its March 2020 report:

67. Ship-to-ship transfers in the Gulf of Tonkin (see S/2019/691, para. 20) have decreased substantially in favour of increased deliveries to the Ningbo-Zhoushan and Lianyungang port areas in China. The increase reinforces the need for port and customs authorities to heighten scrutiny of vessels and their shipping documentation, and to impound any vessel suspected of transporting prohibited items.

We still don’t know how widespread such trade is, but it significantly lowers the transaction costs of North Korea’s coal trade, and thereby lessens the impact of sanctions on North Korea’s export revenue.

What about proportions?

  • According to the WSJ report and US intel sources, North Korea exported 4.1 million metric tons of coal between January and September 2020.
  • No one knows what North Korea paid, but the WSJ report assumes a price of $80–100 per ton in 2020. This places the value of the exports between $330 and $410 million.
  • Is that a little or a lot? Well, it depends. According to UN Comtrade figures, North Korea exported on average 1.7 million metric tons of coal per month to China in 2015. In contrast, 4.1 million metric tons between January and September gives close to half a million metric tons per month. In April 2016, coal exports totalled 1.53 million metric tons, to the tune of $72.3 million.
  • The WSJ figures place North Korean revenue at $36.6-$45.5 million on average per month for January-September. Using the 2016 April figure as a benchmark, it is absolutely not an insignificant number. At the same time, it is nowhere near — really, less than half by one measure — what North Korea has received for its coal exports in the past.

This by no means gives a perfect representation of the proportions at hand. After all, both 2015 and 2016 were boom years for North Korean coal exports to China. At the same time, judging from this limited data, we should not assume that things are back to normal only because China’s sanctions implementation seems to have begun to taper off. At the moment, it’s also very difficult to tell what proportions of the downturn in trade originates from North Korea’s own, self-imposed border lockdown, and from sanctions respectively.

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