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North Korea exporting sand, gravel and coal to China from Sinuiju

Tuesday, November 15th, 2016

Benjamin Katzeff Silberstein

An interesting example of how the transition from state-owned to private enterprise impacts the workings of certain firms. Daily NK:

North Korean ships from Sinuiju, North Pyongan Province are reportedly exporting in excess of 100 tons of sand and gravel into China each day.
“Shipping firms from Sinuiju are earning foreign currency through contracts with private Chinese construction businesses. The North Korean authorities are supporting the operations after receiving orders to finance the export of coal and sand to China. They are also providing wages and food for the workers,” an inside source from North Pyongan Province told Daily NK on November 11.
Additional sources in North Pyongan Province corroborated this information.
The source added that although the city’s shipping industry was originally a state enterprise, that is no longer the case. The industry is now run by private enterprises that deal with the domestic and Chinese markets. When the operations were state owned, there were chronic shortages of capital and sailors were forced to use sub-standard vessels. The regime’s new policy – to let the industry rehabilitate itself through benign neglect – has allowed the businesses to revitalize themselves. By exporting sand across the Yalu River into China, these businesses have earned enough capital to purchase better vessels. A number of enterprises and the associated infrastructure has grown as a result.
“As the volume of sand exported continues to rise, the shipping companies are inducing more service providers and factories to participate in the industry. The Anju Country 105 Sand Factory collects sand from the Chongchon River and transports it by way of the Yalu River to the shipping firms,” the source added.
When asked about the scale of the trade, she noted, “Sinuiju Harbor sees a daily influx of Chinese boats that carry away more than 100 tons of sand and gravel. Because exports are continuing to climb, the shipping firms are using the capital to enter new industries such as coal export.”
The North Korean enterprises see sand as an inexhaustible natural resource, the source explained, adding, “The more we sell, the better quality sand we can bring in. The enterprises are doing quite well for this reason. The factory cadres are accumulating vast sums of money, and continue to look for ways to increase their profits.”
The flourishing business has also improved prospects for workers. Laborers in the sand and gravel collection factories can earn enough money to put food on the table for a family of four – with food provided to them plus approximately 50,000 KPW per month (U.S. 6.14) for extras.
“The authorities are also using the opportunity to generate propaganda about the generosity of ruler Kim Jong Un,” the source asserted.
The revitalization of the sand collection industry is a positive development from the point of view of the authorities, as all Yalu River sand enterprises are first and foremost responsible for the supply of Kim Jong Un’s pet construction projects, such as the Ryomyong Street Project.
“The authorities can simply sit back and relax as they receive money, supplies, and credit for the success of the sand business. This reveals that the solution to North Korea’s problems is freedom of the market,” she added.
As exports continue to increase, the donju (North Korea’s nouveau riche) have expanded the scope of their interests and investments. “First, they purchase a large boat. Next, under the pretense of being a shipping business, they start to branch off into other industries to make more money. The factories give the donju the authority to do the trading and receive 30% of the profits in return,” the source concluded.
Full article:
NK exports 100 tons of sand, gravel, & coal daily from Sinuiju Harbor
Seol Song Ah
Daily NK
2016-11-15
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Posted in China, Economic reform, International trade, Political economy | Comments Closed

The social consequences of re-forestation efforts in North Korea

Tuesday, November 15th, 2016

Benjamin Katzeff Silberstein

This post is primarily for my own archival purposes, but hopefully others can find it useful too. It gathers four articles that deal with the social consequences of re-forestation efforts in North Korea. I’ve dated it to the latest among these four articles.

Cutting down trees is punishable by death, according to a 2016-decree. NK News:

The North Korean state has been warning citizens who hamper forest restoration and destroy natural habitats that they might face the death penalty for their crimes, photos obtained by NK News this month and taken last year have revealed.

The source could not say where in the country photos were taken, due to the sensitivity of obtaining the material.

The proclamation listed recommended and prohibited activities and was released by the DPRK’s Ministry of People’s Security under the National Defense Commission on March 17, 2015.

The punishment applies to all organizations and companies as well as residents.

“[The promulgation] clamps down, arrests and legally punishes those who violate [the rules], regardless of post position, distinguished service, and affiliation,” the Ministry of People’s Security said in a written statement.

“Someone causing forest fires or cutting down trees indiscriminately and illegally in specially protected forest areas will be punished ‘carrying a maximum penalty of death.’”

The People’s Security Ministry urged violators to confess within one month, saying those that do would be “treated leniently.”

The announcement also alluded to a feud between locals and the law enforcement tasked with protecting forests.

“Don’t ever protest against and assault officials in charge of supervising and controlling the enforcement,” the Ministry of People’s Security warned. The authorities said the criminal would be caught in the act and face “severe legal punishment.”

Full article/source:
Exclusive: N.Korean warning threatens deforesters with execution
Dagyum Ji
NK News
2016-11-15

Re-forestation efforts are often much more difficult to implement in practice than to formulate in theory:

North Korea has been
pushing forward with reforestation efforts in an attempt to produce visible
achievements ahead of the 7th Party Congress in May, but those who have been
mobilized for the labor-intensive projects are complaining profusely, realizing
that the campaign will fail to produce the expected results.

“On Arbor Day (March 2), the grounds still
hadn’t thawed from the winter cold, so no matter how hard you try, the trees
aren’t able to secure their roots,” a source from North Hamgyong Province told
Daily NK on Wednesday. “There’s not enough manpower to dig through the frozen
ground, and the tree and forest management offices are all for show. So from
the initial planting stage, we’re unable to find healthy saplings to plant.”

Sources in Ryanggang Province and South
Hamgyong Province corroborated this news.

“On top of that, those from above are
pushing the citizenry to plant tens of thousands of trees in time for the
‘70-Day Battle’, so some people find tree segments without roots and just place
them in the soil, before reporting them as progress made,” he added. “You can
even see people who don’t have the money to buy these saplings, going out at
night to uproot those planted elsewhere and transferring them to new areas that
have been designated for forestation that month.”

North Korea has for many years pushed for
reforestation in the spring with all-out campaigns, but the results have been
negligible so far, according to the source. This is because the majority of the
trees planted each year are unable to survive due to poor soil conditions and
problems with sapling health. Even those that manage to survive do not last
long in the absence of proper care.

Full article/source:
Another year, another misguided attempt at reforestation
Daily NK
2016-04-07

And plots used for food planting are often lost to re-forestation efforts, as the state claims the land:

As part of leader Kim Jong Eun’s efforts for reforestation, North Koreans cultivating small plots on roadsides
or mountain slopes have been ordered to plant trees in those areas and dispense with cultivation of the land in four years time.

“In time for national mobilization for land
management, forest protection agents announced at inminban [people’s unit]
meetings that residents using individual plots near the road or on the slopes
of mountains will have to manage trees planted there while cultivating the
land,” a source from Yangkang Province told Daily NK on Monday.

He added, “The major problem here is that they were ordered
to abandon that land after four years and stop farming there. This has seriously upset a
lot of people.”

Following Kim Jong Eun’s visit to Pyongyang’s
Central Tree Nursery late last year, orders to plant trees in individual plots
were handed down nationwide. However, many chopped down trees that were impeding farming practices, to which the state responded by slapping a ban on cultivating the land after the trees reach four years of maturity, according to the
source.

Despite the mandate, some residents still weed out the seedlings, meaning that for at least the month of April, the forest protection agents, of whom numbers continue to rise, will “basically have to live and work in the mountains,” the source said.

Still, the source speculated the number of those daring to get rid of trees will not be particularly high. This is because Kim Jong Eun’s emphasis on reforestation as an issue of top priority implies serious repercussions for anyone that goes against related orders. “Some have even said weeding out
planted trees at a time when the entire nation is busy with reforestation would
be like grabbing brushwood and throwing yourself into a fire,” he said.

Full article/source:
Plots for Food Lost to Reforestation Efforts
Kang Mi Jin
Daily NK
2015-04-08

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Posted in Agriculture, Civil society, Economic reform, Forestry, Kim Jong Un, Ministry of Forestry | Comments Closed

Increase in DPRK companies involved in Pyongyang Autumn International Trade Fair

Friday, September 23rd, 2016

Institute for Far Eastern Studies (FES)

Despite the tough sanctions of the international community, Pyongyang’s Autumn International Trade Fair has opened. A standout in this year’s proceedings is that, unlike previous years, there are now more North Korean companies participating than foreign companies.

According to reports in Chosun Sinbo, a pro-North Korean newspaper published in Japan, the trade fair was held from September 5th to 8th in Pyongyang’s Three Revolutions Exhibition Hall. A total of 15 national and 280 regional companies in fields as diverse as electronics, machinery, metals, construction materials, transport, medicine, agriculture, light industry and foodstuffs participated.

The newspaper’s reporting highlighted “the release of many processed products for export using domestically produced materials as a result of cutting-edge science and technology introduced into our country’s [North Korea] factories and workplaces, upholding the value of autonomy and self-strengthening, which is a feature of this, the 12th Pyongyang Autumn Trade Fair.”

In addition, the newspaper added that “in the recent few years, the fair has seen a rising number of domestic (North Korean) companies participate, and this time around too, there were more domestic than foreign companies involved. . . . As with previous years, domestic companies have bravely displayed many light industrial products, with the number of products from the electrical sector rising every year being particularly noteworthy.”

The newspaper especially pointed out “in recent years, research and development, and production of a variety of electrical and electronic products with our branding has been actively proceeding in [North] Korean factories. . . . There are now more than 30 brands of electrical products being produced including ‘Blue Sky’ and ‘Morning’, with 10 such brands being on display at this year’s autumn trade fair.”

These companies exhibited up-to-date consumer electronics including tablet computers, desktops, laptops and LCTVs.

Ri Gyong Sim (36), an employee of the Rakwon General Trade Company (participating for the second time in the trade fair) stated that “of late, demand has been rising amongst the people for electrical goods with our brand name. . . . this is because, first of all, our credibility is guaranteed by production units, and direct sales points also do repairs, so the consumer’s demands for convenience are satisfied.”

Ri also said that coming to the fair allowed him to check what was good about competitors’ products and this would help his company improve their offering. He also said that “there is a multiplier effect in quality terms with the products on display at the trade fair as domestic companies compete with the same products.”

What’s more, there were many participants from the Fareast including China and Mongolia, and Southeast Asia, including Singapore, Malaysia, Thailand, Indonesia, and Vietnam. Russian, German, and Italian participants were also present.

The newspaper pointed especially to the fact that “since last year, Singaporean companies, food companies in particular, have shown an active interest in trading with [North] Korea.”

This includes a Singaporean trade company called Gold Kili, a manufacturer and seller of drinks including coffee and a variety of teas. It is a famous food company in Singapore, which exports its products to 30 countries.

The company’s head, Chu Wai (44) said that of the products on display at the Trade Fair, the Korean people purchased much coffee in particular, and that he was satisfied with having a number of discussions about commercial transactions.

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Posted in International trade, Pyongyang International Trade Fair | Comments Closed

Financial complex and upscale hotel construction presses ahead in Wonsan

Wednesday, September 7th, 2016

Institute for Far Eastern Studies (IFES)

To develop the ‘Wonsan-Mount Kumgang International Tourist Zone’, plans have been put in place to build a General Financial Complex and five-star hotel in Wonsan.

Naenara (My Country), a North Korean propaganda website that targets an international audience, indicated that the goal of ‘Wonsan’s Chungdong General Land Development’ Investment Proposal released September 1, 2016 was to “develop Wonsan into a commercial and cultural exchange center, as well as a center for trade and financial transactions.”

According to the proposal, the target of investment is the Chungdong district and parts of the Sangdong district of Wonsan (Kangwon province) with a total area of 300,000 square kilometers. The total amount to be invested was set at USD 196,560,000.

In addition, the proposal sets out plans to first construct ten separate buildings, including 10 units of rental housing, a three-star hotel, an international finance complex, a department store, an indoor gym, and a restaurant for world cuisine.

The proposal adds: “in the surrounding area (of the center), world-class facilities including an ultra-luxurious five-star hotel called the Wonsan Hotel, a General Financial Complex, a General Office Complex, an International Exhibit, and a library are to be constructed.”

It also makes clear that existing housing, commercial facilities, offices and factories in the area will be demolished.

With respect to international investors, the proposals envisage that development will utilize the BOT (Built-Operate-Transfer) method. BOT is a method of funding infrastructure projects in which a contractor is given the right to operate a set of facilities for a prescribed period in order to recover both the initial investment and a profit, before control of the facilities reverts to the contracting party.

The website states that “the Committee to Promote the Development of the Wonsan-Mount Kumgang International Tourism Zone was chosen for the spill-over effects for both the Wonsan area and the zone as a whole.”

Moreover, the separate ‘General Finance Center Proposal’ was also released via Naenara on the same day– the building is set to be 15 stories high, with additional two basement floors.

The complex has a total area of 1,500 square meters, the actual building area of 800 square meters, and total floor of 12,000 square meters. The building will play host to banks, office space and restaurants.

The proposal emphasized that “the development of the Wonsan-Mount Kumgang Tourist Zone into a world-class tourist site reflects the firm will of our party and government . . . . The future tourist zone will radiate the light as the ‘East’s Pearl’ transformed into a renowned tourist destination both in East Asia and more broadly the entire world.”

Here is the text from the Naenara article (PDF).

 

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Posted in Construction, Foreign direct investment, Tourism, Wonsan-Mt. Kumgang International Tourist Zone | Comments Closed

North Korea’s natural resources and the “Five-year Plan”

Monday, August 29th, 2016

By Benjamin Katzeff Silberstein

North Korea’s natural resource and minerals issue runs as a clear thread throughout its economic past and present. On the one hand, they provide immense wealth (not least through export revenues), but on the other hand, the leadership has often been wary of letting their role grow too large. Moreover, it appears that the North Korean leadership, both at various times in history and in recent years, has seen individuals scrambling to amass personal wealth through mineral exports as a danger to state incomes and economic control. Recall that one of the accusations against Jang Song-taek was that he sold off the country’s natural resources to “foreign countries” for cheap.

In a brief from the beginning of the month, IFES analyzes Rodong Sinmun coverage of the role of natural resources in implementing the five-year plan for economic development, the details of which are yet to be revealed:

Kim Jong Un has appealed for all energy to be put into developing underground resources in order to implement the ‘Five Year State Economic Development Strategy’ (unveiled at the 7th Party Congress of the Workers Party of Korea held in May).

In reporting that appeared in Rodong Sinmun on July 13, 2016 it was asserted that “The task of developing and using underground mineral resources effectively to raise self-sufficiency and independence lies in front of party members and workers who are vigorously participating in a 200 day speed battle to make a breakthrough in the implementation of the Five Year State Economic Development Strategy in the country, which is known worldwide for its minerals.”

Self-sufficiency and natural resource dependence have often been highlighted in North Korean economic publications as mutually exclusive. Presumably, Rodong Sinmun advocates that natural resources be used for economic production through fuel and the like, rather than merely for export incomes.

It went on to urge that “with the close collaboration between the state resources development sector and scientific research groups, all resources must be concentrated on prospective and current surveys (surveys that measure mineral reserves) to ensure that the Five Year State Economic Development Strategy succeeds.”

It added, “energy must be put in to find more as yet undeveloped potential sites for development . . . reserves must be secured to ensure that mine production continually rises.”

It also emphasized that “all illegal extraction of underground mineral resources by [production] units, factories and collective organizations for the benefit of their own unit alone must be gotten rid of . . . [and] the role of institutions supervising and controlling underground resources and environmental protection must be strengthened.”

In other words, incomes from mineral extraction should go to the central government, and individuals trying to exploit the expanding opportunities for private business activity to generate personal profits through mineral exports should be kept under control.

Admittedly, the paper also demanded natural tourist attractions be protected: “the staff of supervisory institutions must engrave deeply in their hearts the earnest wish of the Great Leader by not developing Mount Kumgang and Mount Myohyang, regardless of how large the underground mineral deposits are there, and hand down their beautiful scenery and nature to posterity.”

At the aforementioned 7th Party Congress, Kim Jong Un unveiled the ‘Five Year State Economic Development Strategy’, and also set out to revolve energy problems and strengthen the self-sufficiency and independence of the people’s economy.

Full publication here:
Mobilizing “All Energy in Securing Underground Resources” to Implement Development Strategy
Institute for Far Eastern Studies
2016-08-01

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Posted in China, Foreign direct investment, International trade, Mining/Minerals, Political economy | Comments Closed

North Korea’s smallest market?

Thursday, August 11th, 2016

Sometime between 2015-5-25 and 2016-6-27 a new candidate for what may be North Korea’s smallest formal market (시장) was built in remote Komsan-ri, Hyesan City, on the Chinese border.

Komsan-ri-Market-2016-6-27

The Market is approximately 17m x 12m and consists of a central table and possible vending space around the perimeter.

There may be a smaller formal market somewhere in the DPRK, but I can’t think of one at the moment.

Here are some other recent changes that have taken place in Hyesan (new customs office, orphanages, renovated railway line progress (to Samjiyon) and some renovated train stations.

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Posted in Economic reform, General markets (FMR: Farmers Market) | Comments Closed

North Korea training experts in special economic zones and development

Wednesday, August 10th, 2016

Institute for Far Eastern Studies (IFES)

North Korean universities have begun programs to train specialists in matters related to special economic zones (SEZs) and their development.

On August 1, 2016, the North Korean website Naenara (lit: ‘My Country’) revealed this, saying “One of the most important matters with respect to development of Special Economic Zones (SEZs) is the training of a large number of specialists. Hence, the government of the republic [DPRK] has established and implemented an educational program that aims to train specialists in this field.”

According to the website, the training of specialists in the development of SEZs has begun at Kim Il Sung University, the University of the People’s Economy, and Jong Jun Taek University of Economics (also known as Wonsan University of Economics).

These universities have departments specializing in the management of SEZs, real estate, tourism, and international investment. The curricula are based upon the developmental experiences of Rason Economic Investment Zone, the Hwanggumpyong-Wihwado Economic Zones, along with the law, regulations, and the experience of other countries.

These departments train specialists on the economic principles and effects of special economic development zones, theories on the form zones take and how development occurs, as well as how developmental strategy is devised. They also deal with issues like the creation of comprehensive development plans, the designation of companies for participation in development projects, the conclusion of development-related contracts, the conferring of development rights, the conclusion of land-usage contracts, the sale of land usage rights and the operation of sub-structural operations, and management of investment by foreign companies.

Naenara’s post also indicated that “the government of the republic has organized the investigation of the success of other countries in the development of special economic zones, this is being undertaken by university staff and researchers. A number of the country’s universities, research institutions, persons of repute, and public forums are engaged in these tasks.”

It also underscored the aim of “in future, scientific research dealing with special economic zones (SEZs) should be deepened, and education programs strengthened. Moreover, multifaceted cooperation and exchanges should be expanded with all countries that respect the sovereignty of the country [DPRK].”

The North Korean magazine ‘Mount Kumgang’ — which targets a foreign audience — for the last two months has also printed a series entitled ‘Regarding plans to expand foreign investment relations’. The series publicizes the variety of government policies designed to attract investment.

In one of these pieces, Cho Chang Jun (a professor of the University of the People’s Economy) explains that “with the importance of our government’s efforts to expand and develop foreign investment relations lies a number of legal measures, implemented in a way that is stronger than ever before, and which give foreign investors in our country a guarantee, in the government’s name, for a return of the principal invested and the payment of profits.”

The Rason SEZ (Rason Economic and Trade Zone) was created in the 1990s. In 2013, SEZs were also announced in each of the country’s provinces. At present there are 26 SEZs in North Korea.

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Posted in Education, Real estate, Special Economic Zones, Tourism | Comments Closed

Hay, Kalb and Associates suspending operations

Monday, August 1st, 2016

According to Reuters:

North Korea’s first and only law firm set up by a foreigner, Hay, Kalb & Associates, will suspend operations, the firm’s principal said in a statement on Monday, as the country grows increasingly isolated.

The firm is a joint venture between the North Korean state and British-French citizen Michael Hay, who has represented foreign clients in the capital, Pyongyang, for 12 years.

Hay said he had made the decision based on “business and geopolitical principles”.

“This decision has been taken only after lengthy and thorough deliberation and an examination of the continuing deterioration of inter-regional relations pertaining to the Korean peninsula,” Hay said in a statement.

“It is not unreasonable to assume that no meaningful change or indicator of change in relations shall occur, if at all, until well after the United States Presidential Inauguration, on January 20, 2017,” Hay said in the statement.

North Korea has come under growing diplomatic pressure since its January nuclear test and a long-range rocket launch in February, which led to a new U.N. Security Council resolution in March that tightened sanctions against Pyongyang.

The majority of Hay’s clients are foreign investors, many of whom have been negatively affected by the sanctions, Hay told Reuters.

“Sanctions are hurting legitimate foreign investors. There still is no credible, consistent evidence I see of DPRK companies hurting,” Hay said. DPRK stands for Democratic People’s Republic of Korea, the North’s official title.

Very few foreigners live or work in North Korea. Those who do are usually members of the diplomatic or NGO community, although a small group of foreign investors have maintained a quiet and steady presence inside the country.

The suspension takes effect from midnight on Monday, Hay said, with an official suspension scheduled for Aug. 14, the firm’s 12-year anniversary.

Hay, who bills his firm as the only foreign-invested firm in North Korea, said he will still maintain an office in Pyongyang.

North Korea has more than 8,000 law graduates, according to an official 2008 census, half of whom are based in Pyongyang. Most are employed by the state.

Read the full story here:
North Korea’s only foreign-founded law firm suspends operations
Reuters
James Pearson
2016-8-1

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Posted in Foreign direct investment, International trade, Joint Ventures | Comments Closed

Is North Korea’s food situation really getting worse? The markets don’t think so.

Friday, July 22nd, 2016

By Benjamin Katzeff Silberstein

Since early 2016, the Food and Agriculture Organization of the UN (FAO) has been sounding the alarm bells on North Korea’s food situation. In an interview a few weeks ago with Voice of America’s Korean-language edition, FAO-official Christina Cosiet said that this years’ harvest would be the worst one in four years. One question, dealt with before by this blog, is how bad this really is. After all, the past few years seem to have been abnormally good in a long-run perspective.

But another obvious question is: why do market prices in North Korea tell the opposite story about food supply?

Prices for both rice and foreign currency (US-dollars) have remained remarkably stable for a situation where people should be expecting a worse-than-usual harvest. It is important to bear in mind that prices are largely seasonal and tend to increase in September and October. But unless prices somehow skyrocket in a couple of months, things do not look that bad.

There seem to be two possibilities here: either official production and food supply through the public distribution system simply does not matter that much, because shortages are easily offset by private production and/or imports. Or, the FAO projections simply do not capture North Korean food production as a whole.

For an overview of food prices in the last few years, consider the following graph (click here for larger version):

graph1

Graph 1: Prices for rice and foreign currency, in North Korean won. Prices are expressed in averages of local prices in Pyongyang, Sinuiju and Hyesan. Data source: DailyNK market prices.

As this graph shows, both the exchange rate and rice prices have remained relatively stabile over the past few years. Thus far, this summer has been no exception. The following graph shows exchange rates and rice prices from the spring of 2015 till July 2016 (click here for larger version):

graph2

Graph 2: Prices for rice and foreign currency, April 2015–July 2016, in North Korean won. Prices are expressed in averages of local prices in Pyongyang, Sinuiju and Hyesan. Data source: DailyNK market prices. 

This does not look like the behavior of a nervous market where supply is declining at a drastic rate. Of course, a number of caveats are in order: again, prices are likely to rise through September and October, as they have in the past. Moreover, markets may react to any harvest declines at a later point in time, as they become more apparent.

Even so, it seems inconceivable that market prices would remain so stable if North Korea was experiencing a steep dive in food production. After all, farmers would be able to see signs fairly early on, and their information would presumably spread through the market as a whole. In short, it is logically unthinkable that markets simply would not react to an unusually poor harvest.

This all begs the question of how much market prices tend to correlate with the FAO:s harvest figures overall. The short answer appears to be: not much. The graph below (click here for larger version) shows the average prices for rice and foreign exchange per year on the North Korean market since 2011, and harvest figures drawn from reports by the FAO and the World Food Program (WFP). (See the end of this post for a more detailed explanation of the underlying calculations.)*

graph3

Graph 3: Yearly average market prices for rice and US-dollar (in North Korean won), and FAO food production figures. Data source: DailyNK market prices. 

As this graph shows, there is generally fairly little correlation between market prices and harvests as calculated by the FAO. Harvests climbed between 2009 and 2015, while market prices climbed and and flattened out from 2012, around the time of Kim Jong-il’s death. Exchange rates and rice prices unsurprisingly move in tandem, but appear little impacted by production figures as reported by the FAO.

It is possible that prices react in a delayed manner to harvests, and that the price stabilization on the market is a result of increased harvests over time. But the consistent trend over several years, with prices going up as harvest figures do, is an unlikely one. Again, it is also difficult to imagine market prices not reacting relatively quickly to noticeable decreases in food production.

So what does all this mean?

It is difficult to draw any certain conclusions. But at the very least, these numbers suggest that the FAO food production projections are not telling the full story about overall food supply in North Korea. Moreover, market signals are telling us that food supply right now is far from as bad as the FAO’s latest claims of lowered production would have it. Rather, prices seem normal and even slightly more stabile than in some previous years with better harvests. In short, the narrative that this year’s harvest is exceptionally poor seems an unlikely one.

 

*A note on graph 3:

 For market prices per year, I calculated an average price from all observations in a given year. The DailyNK price data is reported for three cities separately: Pyongyang, Sinuiju and Hyesan. I have used an average of these three cities for each data observation as the base for calculating yearly averages. This is a somewhat tricky way of measuring, as the amount of data observations, as well as their timing, sometimes varies from year to year. The steep decline in 2009–2010 is primarily caused by the currency denomination, and should not be taken for a real increase in supply.

The FAO food production figures are not reported by calendar year, but published in the fall and projected for the following year. Since these figures best indicate available supply for the year after they are reported, I have assigned them to the year following the reporting year. That is, the figure for 2014 comes from the WFP-estimate for 2013/2014, and so on and so forth.

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Posted in 6.28 Policy on Agriculture (June 28), Agriculture, Black markets, Economic reform, Food, General markets (FMR: Farmers Market), Price liberalization, UN, UN Food and Agriculture Organization, UN World Food Program | Comments Closed

KWP cadres and the donju

Friday, July 8th, 2016

By Benjamin Katzeff Silberstein

Some interesting snippets of practical political economy in North Korea, from DailyNK:

It seems like cadres are quite accustomed to watching each other’s backs like this. I’m curious now if there are any other arrangements that follow this pattern.
Absolutely. Cadres don’t engage in this kind of relationship exclusively with one another. The current trend is for cadres to engage in all-ssam with the donju (North Korea’s rising entrepreneurial class). But North Koreans don’t refer to close relations between ordinary people as all-ssam relationships. That being said, I’d like to explore the all-ssam culture that links cadres and the donju a bit more deeply.
In South Korea we’d call these kind of relations between government officials and business leaders as either unhealthy or flat-out collusion. I’m curious how the all-ssam relationships in North Korea break the standard political mold to create new power sharing arrangements. 
One example of how this relationship gets put into action concerns the state factories. The donju rent this space out from the cadres to make their products. But leasing the space requires more than money. To get the space, it’s also necessary to have a relationship with the managing cadres. The donju in South Pyongan Province have gotten quite cozy with the cadres there. The monthly building rental fee issued to the cadres becomes a form of profit for them.
Although this may seem like an illicit affair, the Party secretary affiliated with the factory knows about this. In fact, the secretary encourages ‘extra earnings’ through official orders. ‘Extra earnings’ refers to any profits made by the state factories that do not come from the use of raw materials and labor for the productions of goods for sale.
Moreover, the donju do not merely contribute some of the profits. They also issue a per diem including living expenses to the manager. This is a voluntary donation, and the manager usually responds by scratching the donju’s back in the form of providing extra factory facilities or making things more convenient for them. For example, in return for a per diem, a factory manager might issue an order to let the donju use a state vehicle to transport products to the market.
Seeing this, the Party secretary began to fear that his authority was becoming eclipsed by that of the managing cadres. He became worried that his title was strictly nominal and that he wielded little actual power. That’s why he began to grab up donju and bring them into all-ssam relationships with him. Those that didn’t enter into the relationship were cast out of his good graces. The more prosperous the donju, the bigger the problem for the cadres.
Full article here:
The complex ties interlinking cadres and the donju
Daily NK
2016-07-08
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Posted in Black markets, Economic reform, Political economy | Comments Closed

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