Archive for the ‘Economic reform’ Category

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

Friday, March 10th, 2023

By: Benjamin Katzeff Silberstein

A few updates on the food situation:

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

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

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

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

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

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

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

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

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

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

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

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

[…]

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

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

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

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

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

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

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

[…]

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

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

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

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

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

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

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North Korean government installs corruption complaint boxes

Monday, September 19th, 2022

By Benjamin Katzeff Silberstein

Albeit a small one, but yet another data point on the North Korean government campaign against corruption. Radio Free Asia reports:

Government workers, like all North Korean citizens, are paid a small monthly wage by the state, but it is not enough to live on. Most families start businesses, selling goods in the marketplace or performing services to make enough money to get by. Government officials, however, can use the power of their position to bring in extra cash by extracting bribes in return for their services.

Citizens who know about the shady dealings can now more easily report them, although many are reportedly reluctant to do so. Complainants must give their names, leaving them susceptible to retribution by the people they identify as corrupt.

“A box for reporting on officials was installed on the main gate of the Hungnam Pharmaceutical factory the day before yesterday,” a resident of the eastern province of South Hamgyong told RFA’s Korean Service Sept. 15 on condition of anonymity for security reasons.

“Up until now they only had report boxes at the building of the reporting division at the provincial, city and county level. … The fact that the report box is now in a factory is an expansion of the corruption reporting system,” said the source. “This measure follows the Central Committee’s order to strengthen the system to identify officials who are blinded by self-interest and are violating the interests of others.”

(Source: Hyemin Son, “North Korea installs more complaint boxes to tackle corruption,” Radio Free Asia, September 19th, 2022.)

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North Korea’s agricultural production grew last year, South Korean data says

Thursday, August 11th, 2022

By: Benjamin Katzeff Silberstein

South Korea’s Bank of Korea (BOK) recently published its GDP estimates for North Korea in 2021. Overall, their estimates (the faults and flaws of which are many) are consistent with the general impression that last year wasn’t great for North Korea, but also relatively stabile.  An estimated GDP decrease of 0.1 percent in 2021, after all, is a whole lot less than the contraction estimated by BOK for 2020, minus 4.5 percent.

Agriculture (including forestry and fisheries) is, interestingly, estimated to have grown by 6.2 percent. Such precise numbers are rather pointless in estimates like this. Nonetheless, the direction seems to confirm assessments by the World Food Program and others that agricultural production last year performed somewhat better than the years before.

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Yoon’s “audacious plan” may be doomed to fail from the start, but that’s not the point

Wednesday, July 27th, 2022

By: Benjamin Katzeff Silberstein 

There’s been an increasing amount of reporting on the Yoon government’s “audacious plan” for the North Korean economy over the past few weeks. A recent example here from Yonhap:

South Korea is seeking to coordinate with the United States and other countries before announcing the details of its “audacious plan” to revive North Korea’s economy in the event it accepts denuclearization, a presidential official said Monday.

Yoon outlined the plan in his inauguration speech on May 10, saying if North Korea genuinely embarks on a process to complete denuclearization, South Korea will be prepared to present an “audacious plan” to vastly strengthen North Korea’s economy and improve the quality of life for its people.

Last week, he asked Unification Minister Kwon Young-se to come up with the details.

[…]

“It’s far more realistic and likely to be accepted by North Korea if we announce it after sufficient consultations with the United States and other relevant countries, so we’re trying hard to include such details,” the official said.

(Source: “S. Korea seeks to coordinate with U.S. over ‘audacious plan’ for N. Korea,” Yonhap News, July 25th, 2022.)

I’ve already covered the “audacious plan” a little here on the blog. Here’s an excerpt from a post I wrote in May:

It seems likely to me that Yoon is aware of all of this – he presumably gets high-quality briefings on North Korean policies – but that this was the least bad thing to say, since he had to say something about his vision for North Korea policy. Subin Kim, who analyzes South Korean politics at his excellent website Koreakontext, pointed out in an email that most of Yoon’s national security team consist of the same people who advised Lee Myung-bak on North Korea policy. Perhaps this is simply a way of avoiding the topic by repeating tired and tried phrases. In any case, such suggestions are a dead end with North Korea, and Yoon likely knows it.

“All of this” being the many ways in which North Korea has declared it is not interested in “economic cooperation” in the sense that South Korean politicians often do, namely with heavy South Korean involvement in management and administration. South Korea most likely wants to consult with the US about the plan not to strengthen its implementation through cooperation, but as a courtesy to a close ally.

We will likely see the plan revealed soon, but I’m not too optimistic it will continue anything truly new or bold. Rather, each South Korean president simply needs his or her plan for North Korea, and Yoon is likely launching this in large part to meet that expectation.

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Market conditions in North Korea, amid rising prices

Monday, July 11th, 2022

By Benjamin Katzeff Silberstein

Unfortunately, Daily NK recently ceased general publication of their detailed price data, but a recent report details how prices are rising in the country. In combination with the crackdown on unauthorized small-scale trade, conditions are tough for the many North Koreans sustaining themselves through market trade:

A recent spike in the price of staples such as rice and corn at North Korean markets is making things even tougher for ordinary people in the country.

A source in Yanggang Province told Daily NK on Wednesday that the price of rice at markets in the city of Hyesan has been increasing since the beginning of last month.

Moreover, since June 30, the price of one kilogram of rice has gone above KPW 6,000, leaving more North Koreans without access to grain and stoking anxiety among the public, the source said.

He also reported that rising food prices have made things even harder for street vendors, who were already hit hard when the North Korean authorities closed the national borders  and intensified crackdowns on the vendors.

According to the source, one resident of Hyesan who supports herself by selling rice cakes on the street has made few sales since June. Crackdowns by the Ministry of Social Security have kept her from selling rice cakes, putting her further in debt.

Without any income, the woman cannot even keep up with the interest on the loans she took out to fund her business. If she misses a second deadline for making her interest payment, the interest will balloon and her credit will collapse, leaving her unable to borrow any more money, he explained.

On top of her predicament, food prices in the market continue to rise, and the woman is now afraid she will become completely destitute.

“Even though the ‘barley hump’ has passed, food prices just keep getting higher and higher. The mood among the populace is so grim that some are afraid people will resort to cannibalism if things keep on like this. Many people are so famished because of the high cost of food that they can’t even go to work,” the source said.

(Source: Lee Chae-un, “Recent spike in rice and corn prices make things even more difficult for ordinary N. Koreans,” Daily NK, July 8th, 2022.)

Price data from Rimjingang also reflects this trend. Prices in their data set went from 5,400 won/kg for rice on June 10th, to 6,700 on the 17th and 6,600 on the 24th, and stabilized somewhat at 6,300 won on July 8th. In USD terms, that’s an increase from 0,72/kg to 0,86 most recently, an increase of almost 20 percent.

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Oil and fuel supply shortages on North Korean markets?

Wednesday, March 23rd, 2022

By Benjamin Katzeff Silberstein

It’s been a couple of months since railroad traffic opened again between China and North Korea. Although it isn’t very much time to fully evaluate such a drastic change, we can see some interesting price movements on the country’s markets. (Click to see the full graph.)

Average of market prices for rice, gas, diesel, USD and RMB in three North Korean cities. Graph by NK Econ Watch. Data source: Daily NK. 

First, and unsurprisingly, foreign exchange rates have gone up drastically. This makes perfect sense, since news of trade resuming would make more North Koreans want to hold foreign currency, to import and purchase goods from abroad.

Second, both diesel and regular fuel prices have gone up, and quite drastically. As Daily NK notes, the fuel price increase in North Korea is much higher than that of global oil prices. This is also logical, since businesses have likely increased their purchases of fuel in anticipation of increased demand as border trade increases. I’m not sure, however, that the entire magnitude of the increase can be explained this way, since in some localities, prices have more than doubled. Diesel prices have also skyrocketed, which is somewhat unusual since gas and diesel prices tend not to fluctuate this much together. (Gas prices are some of the most volatile on North Korean markets and often fluctuate with the geopolitical situation.)

Price hikes in China, on both diesel and gasoline, are likely a strongly contributing factor. Another significant factor, reported by Daily NK in the article above, is likely moves by the North Korean government to restrict private fuel sales, perhaps leading hoarding by sellers. The rapidly rising exchange rate also makes fuel more expensive, but fuel prices have risen faster than the exchange rate.

Increased supply from China may come to stabilize fuel prices, but given global oil price increases, such deliveries to North Korea are increasingly costly for China as well.

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North Korean authorities call street vending a “crime against the people”

Wednesday, December 8th, 2021

Benjamin Katzeff Silberstein

Reports Daily NK:

North Korean authorities recently designated streetside commerce as a “crime against the people” and have begun ideological education efforts to tamper down discontent surrounding government crackdowns on street merchants.

Daily NK recently obtained “political activity materials” written by the Central Committee’s Propaganda and Agitation Department entitled “Let’s Completely Eliminate the Phenomenon of Commerce near Markets and in the Streets.” The materials were used during lectures at factories, enterprises and inminban (people’s units) throughout the country from early to mid-November.

The materials start by saying, “COVID-19 is causing great anxiety and concern in the international community as it spreads throughout the entire world, while the appearance of variants is causing a major global disaster.”

The materials then say that with the authorities declaring a national quarantine emergency and closing the border to stop infections, some “unawake” people were in a flap over “temporary difficulties” and obstructing quarantine efforts by carrying out “chaotic” commerce near markets and on the streets. Essentially, the authorities are stressing the justification for the controls on streetside commerce.

Daily NK previously reported that North Korean authorities — led by the Ministry of Social Security — have strengthened their controls on streetside commerce since March, forcefully confiscating the wares of so-called “grasshopper merchants,” as streetside merchants are called in North Korea. They have gradually strengthened their crackdown since then, dragging off people involved in the trade to forced labor camps.

Despite the “mop-up operation,” however, locals reportedly continue to engage in streetside commerce to overcome economic difficulties brought on by the COVID-19 pandemic, evading surveillance by regulators. People have also expressed considerable bitterness over being prevented from doing business as they like. Aware that people are very unhappy, the authorities have begun ideological education efforts in response.

The materials condemned “many people” for “creating disorder near markets and on the street, failing even to wear masks” and “threatening quarantine efforts by serving food of questionable sanitation and safety,” all out of an obsession with “earning just a few coins more.”

(Source: Kim Chae Hwan, “North Korea calls streetside commerce a ‘crime against the people’,” Daily NK, 6/12/2021.)

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Some news on the donpyo implementation

Tuesday, November 23rd, 2021

By Benjamin Katzeff Silberstein

An interesting and illustrative reminder of how much economics is about the public’s trust (or lack thereof) in the system… Daily NK:

There was a recent incident at a market in Pyongyang’s Sosong District in which a money changer refused a request by an employee of the financial section of a particular enterprise to change donpyo for foreign currency. Ultimately, the money changer exchanged the vouchers at a rate of KPW 2,500 for each KPW 5,000 voucher, but he was arrested by police after they were called to the scene.

The incident suggests that North Korean authorities are paying enterprises that need state funds in donpyo rather than cash, and that those enterprises are putting money together by changing the vouchers into foreign or local currency through money changers.

The source said that the financial sections of enterprises are also trying to get rid of their donpyo as quickly as they can by immediately exchanging them or depositing them in banks. This suggests just how little faith locals have in the vouchers.

Meanwhile, the groups will reportedly focus their efforts on improving the public image of the donpyo, even as they crack down on rumors about the vouchers and businesses that refuse to change or accept them.

The source said the authorities do not believe locals will voluntarily use the donpyo if they start by “strongly making examples” of people. He said the party ordered that educational efforts to teach the principles behind the donpyo should be prioritized over forcing people to use the vouchers.

(Full article here: Seulkee Jang, “North Korea organizes inspection teams to ensure smooth distribution of money vouchers,” Daily NK, 22/11/2021.)

 

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Kim Jong-un on North Korea’s import problem

Tuesday, October 26th, 2021

By: Benjamin Katzeff Silberstein

Over the past few weeks, Kim Jong-un has made a few interesting statements on reducing North Korea’s imports reliance. This is not a new theme by any means, and economic self-reliance is, at least in theory, a cornerstone of North Korean ideology. At the same time, the timing is probably no coincidence. The Covid-19 border closure has led to serious shortages of imported goods in particular causing, among other things, a lack of ink and paper to print the domestic currency.

In a speech to the Supreme People’s Assembly on September 30th, 2021, Kim spoke about the need to strengthen state “guidance” over the economy, and to make “all trade activities” in the “direction” of “decreasing the reliance on imports”:

대외경제사업에 대한 국가적지도를 심화시켜 모든 무역활동이 경제부문의 수입의존성을 줄이고 자립성을 강화하는 방향에서 확대발전되도록 하며 경제관리분야에서 국가경제지도기관들의 집행력을 강화하고 근로자들의 리익을 보장하기 위한 과학적인 방안들을 진지하게 연구적용할데 대하여 말씀하시였다.

(Source: Choson Sinbo, “김정은원수님께서 력사적인 시정연설 《사회주의건설의 새로운 발전을 위한 당면투쟁방향에 대하여》를 하시였다,” Choson Sinbo, September 30th, 2021.)

On October 19th, as reported by Yonhap here, a North Korean TV-broadcast made virtually the same statement, with the addition that the “economic guidance organs” are taking “active action” to implement the state’s decision.

These are merely two data that points document North Korean concerns about import reliance. Again, it’s nothing new, and I suspect we’ll see more similar statements in the future, perhaps more and more often.

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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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