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China expanding mining rights in N. Korea

Friday, January 15th, 2010

According to Yonhap:

China has expanded its mining rights in North Korea to cover as many as 20 sites, a South Korean report said Thursday.

China is a leading investor in North Korea, which, according to a South Korean study, is believed to have enormous deposits of natural resources, including coal, nickel, molybdenum and bronze.

Further efforts to isolate the DPRK economically allow China to capture even more of these resources at bargain prices. The North Koreans, for their part, are not happy about this. According to the Steel Guru:

At an international conference held in Yanjiin in October, Director of the Economy Institute at the North Korean Academy of Social Sciences Mr Kim Chol Jun had revealed that his country is restricting exports of unprocessed resources. He added that “Mineral resources are exported at high prices by processing them. Exports of cheap unprocessed goods are a loss to the state.”

South Korea’s Unification Ministry estimates that underground mineral resources in North Korea are valued at about JPY 540 and the amount of deposits of magnetite used to trim the weight of automobile parts is the world’s largest at 3 billion tonnes to 4 billion tonnes. In addition to iron ore, North Korea is said to be rich in such rare metals as molybdenum and rare earth.

On a positive note, Chinese takeover of the mines could possibly lead to greater investment in mine working conditions if only to increase output—-although no data is really available to determine if this is the case.

I have been unable to locate the report mentioned in Yonhap because the story did not give any information about the title, author, publisher, or even the date or place it was released.

Posted in China, Economic reform, Foreign direct investment, Mining/Minerals | Comments Closed

Nicholas Eberstadt on the DPRK’s new monetary policy

Tuesday, January 12th, 2010

Nicholas Eberstadt has some interesting statistics in a Wall Street Journal op-ed this week:

For a variety of reasons—possibly including unintended reverberations from the past decade’s nuclear drama—the remonetization [of 2002] did not work well. Too much new money was chasing too few goods, sparking significant inflation. By November 2009, the North Korean won’s black-market value in dollars was barely 5% of the level when the 2002 measures were implemented, a depreciation averaging over 3% per month.

…

The speed and depth of the won’s resulting plunge has been dizzying. The nominal market price of rice is reportedly higher today than it was in November 2009, before currency reform. This would imply 100-fold inflation and then some in just over one month. The won-yuan exchange rate along the North Korea-China border has reportedly dropped by almost 50% over the past month, even after discounting for the 100-to-1 currency conversion. The government apparently has no confidence in its own currency move, and is now betting against it. News reports indicate that Pyongyang this month is issuing soldiers in its public security forces twice their nominal monthly pre-reform wages (a 20,000% raise in light of the currency conversion). If the government finances more wage hikes like this by running the printing presses, it will turn the currency into a toxic asset no one wants to hold.

…

The botched currency reform also has revealed how little North Korean decision-makers understand their own economy, much less the outside world. On a related note, the regime’s supposed heir apparent, Kim Jong Eun, was the mastermind behind the North Korean currency reform, according to South Korean intelligence. This may just be bad intelligence or disinformation. But if accurate, it raises disturbing questions about the judgment of the rising generation of North Korean leadership.

Read the full story here:
North Korean Money Troubles
Wall Street Journal
Nicholas Ebererstadt
1/11/10

Posted in 2002 Economic reforms, Banking, Finance, Fiscal & monetary policy, Food, Price liberalization | Comments Closed

North Korea begins closing wholesale markets

Tuesday, January 12th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-08-1
2010-01-08

North Korean authorities appear to be closing regional, large-scale wholesale markets, one after another. According to the latest newsletter from the North Korean human rights group Good Friends (January 6), “Based on a Cabinet measure passed on December 30 of last year, North Korean authorities will suspend operations management of the Sunam Market in Cheongjin [LOCATION HERE] from the end of this March, effectively deciding to close [the market].”

Like the South Pyeongan Province Pyeongseong Market [LOCATION HERE] reportedly closed last year, the Sunam Market, North Korea’s representative wholesale market, was built less than five years ago. Good Friends reported that provincial authorities from North Hamgyeong Province plan to raze the market, located between Chumok and Cheongnam neighborhoods, and build a modern park and residential housing.

The newsletter revealed, “More than 40 percent of Cheongjin residents rely on the Sunam Market to maintain their lifestyles, and if the market is closed, there will be considerable consequences,” and added that those who trade in the market or rely on it for their shopping are already worried about how they will continue to put food on the table if the market gets shut down.

It has also been reported that the Chupyeong Market [LOCATION HERE], in the Sapo district of Hamheung City, South Hamgyeong Province, will also be closed. The Chupyeong Market, which attracts as many traders as the Pyeongseong Market, apparently specializes in the wholesale trade of imitation goods. Good Friends explains that the Chupyeong Market is a very busy and crowded market, with many shoppers coming and going, and this has also led to an increase in scams, thefts and other crimes. It is anticipated that following the closing of the Sunam Market early in the year, the next move authorities make will be to shut down the Chupyeong Market, as well.

A directive has been issued that North Korean authorities are to ban the sale of manufactured goods in the country’s permanent markets, and that all goods are to be sold only in state-sanctioned retail stores, and at state-set prices. However, sources inside the North report that traders are gauging the attitudes of local authorities, and often not turning over their goods for sale in retail stores. This, along with the North’s currency reform and ban on foreign currency, as well as the increase in farmers’ wages, has led to huge increases in exchange rates and prices.

Currently, workers in state-operated enterprises are being paid anywhere from 1,500 won to as much as 5,000 won per month. With the currency revaluation, this is considerably more than they were making before, but taking into account the massive increases in prices, as well, the impact of the higher wages is negligible.

Posted in Economic reform, Fiscal & monetary policy, General markets (FMR: Farmers Market), Google Earth, Labor conditions/wages, Price liberalization, Public Distribiution System (PDS), Sunam market | 2 Comments »

DPRK cracks down on money lenders

Monday, January 11th, 2010

According to the Choson Ilbo:

North Korean authorities have been rounding up money changers in major cities since Jan. 4, it emerged Friday. Sources in North Korea said an average of 20 money changers were arrested in each major city, including 17 in Pyongyang and 23 in Sinuiju since Jan. 4.

After a shock currency reform in early December, authorities banned the use of foreign currency. In the past, residents had used U.S. dollars in hotels or markets without having to change them into North Korean won.

It seems the State Security Department and the Ministry of Public Security and members of the village resident organizations secretly investigated people’s dollar holdings prior to the currency reform, the sources said.

Heads of the resident organizations from each village reportedly discovered who spent dollars, and the two security agencies investigated foreign currency managers in agencies and enterprises.

The crackdown on money changers appears to be aimed at confiscating the dollars they hold. But more broadly, the North seems determined to ferret out all newly wealthy people by gathering information about state agencies or individuals who have engaged in under-the-counter foreign currency dealings, the sources added. A North Korean businessman who was recently in China said, “The crackdown has quickly frozen the exchange market in the North.”

Rich people who were not affected as seriously by the currency reform because they hold cash in foreign currency are reportedly becoming edgy. Some are now experiencing hardship because they have not been able to change their dollars into North Korean won.

A huge private exchange market has come into existence in the North since 2000. In the early days, only small-scale dealers were engaged in the market, but once they had more than US$100,000, they even opened clandestine offices. In some cases, dealers handle nearly $1 million and work closely with state agencies in Pyongyang.

Officials who handle foreign currency whose source is hard for them to reveal reportedly rely on private money changers instead of government banks. Many money changers even in provincial regions are said to hold more than $100,000.

Read the full story here:
N.Korea Cracks Down on Money Changers
Choson Ilbo
1/11/10

Posted in Banking, Black markets, Fiscal & monetary policy, General markets (FMR: Farmers Market) | Comments Closed

Food prices continue to increase

Sunday, January 10th, 2010

According to an AFP report that cites Good Friends:

Good Friends, citing its own contacts in the reclusive North, said prices for rice and corn doubled last week at markets in the capital Pyongyang and in the eastern port city of Chongjin.

Rice prices ranged from 120-150 won per kilogramme (2.2 pounds) in Pyongyang and 110 to 140 won in Chongjin last week — up from 40 to 50 won reported on December 30, the group said.

Corn also traded higher at 70-75 won last week — up from 20-25 won on December 30 in the areas, it added. Seoul’s unification ministry, handling cross-border issues, could not confirm the data.

The official exchange rate is 135 won to the dollar but the black market rate is between 2,000 and 3,000 won.

The report came as the World Food Programme struggles to raise relief funds for the food shortage-hit North.

Major donors — including South Korea and the United States — refuse to help in protest at its second nuclear test in May last year.

Statistics available at the WFP website display it raised 89.8 million dollars as of late last month, around only 18 percent of its target of 492 million dollars in relief funds for the communist North.

Read the full article here:
Food prices soaring in N. Korea: group
AFP
1/10/10

Posted in Agriculture, Finance, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), International Aid, Price liberalization, UN World Food Program | Comments Closed

Rajin-Sonbong (Rason) clarification

Tuesday, January 5th, 2010

UPDATE: In addition to the information below, the Choson Ilbo reports that the DPRK’s former trade minister has been appointed mayor of Rason. According to the article:

The North Korean regime has appointed former foreign trade minister Rim Kyong-man as the mayor of the Rajin-Sonbong Economic Special Zone, which was promoted to a special city in January. A source said Rim was appointed as part of a reshuffle and new regulations for the city.

Rim is known as an expert in trade who served as the minister for foreign trade from April 2004 to March 2008, and headed the North Korean trade representatives to Dalian in China. He also toured Africa (June 2005), Latin America (November 2005), Libya and Malaysia (June 2006) and Russia (March 2007) as the leader of the North Korean economic delegation.

“It seems that North Korea appointed Rim, who is very experienced in trade with foreign countries, with an aim to further open Rajin-Sonbong as a free trade area,” the source added.

ORIGINAL POST: The designation of Rason as a “special city” this week left me a bit confused, but I believe I have sorted it out.

This week, Reuters reported:

“The city of Rason has become a special city,” the North’s KCNA news agency said in a brief dispatch on Monday.

And Yonhap reported:

North Korea designated Rason, the country’s first free trade zone, as a “special city” on Monday, the North’s official news media reported.

North Korea designated Rason and nearby Sonbong, located on the country’s northernmost coast close to both China and Russia, as an economic free trade zone in 1991, though foreign investment has never materialized.

According to the Korean Central News Agency (KCNA) monitored here, the Standing Committee of the North’s Supreme People’s Assembly designated Rason as a special city in a decree.

So aside from the fact that Rason was named “special” there were no other details given. What does it mean to be a “special city”?

Well, today the nice Chongryun individual in Japan who updates the KCNA web page finally came back from vacation and posted the story to the official KCNA web page. Here is what it says:

Rason City Designated as Municipality
Pyongyang, January 5 (KCNA) — Rason City was designated as a municipality.

The Presidium of the Supreme People’s Assembly of the DPRK said in its decree promulgated on Jan. 4:

1. Rason City shall become a municipality.

2. The DPRK Cabinet and relevant organs shall take practical measures to implement the decree.

Without seeing any additional information it seems that what has actually happened is that the municipalities of Rajin and Sonbong have been dissolved, merged, or been made subject to a newly created Rason municipal government which controls both cities. So Rajin-Sonbong is dead. Long live Rason.

So why would the North Korean government do this? Here is one theory: Since the district was under the direct control of Pyongyang (not the provincial government of North Hamgyong), the DPRK government simply thought that two municipal governments in the special economic zone were one more than was necessary. So this could mean something significant–in terms of the DPRK’s intent to increase foreign trade–or it may not.

If anyone else has a better idea please let me know in the comments.

UPDATE:

1. Here is a decent story in the AFP which interprets the change as a significant policy signal.

2. Here is a decent story in the Daily NK which offers lots of additional information.

Posted in Ministry of Foreign Trade, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

New N.Korean Currency Sees Runaway Inflation

Tuesday, January 5th, 2010

Choson Ilbo
1/6/10

North Korea’s currency reform has apparently failed to tame inflation. The state has paid the first salaries since the shock currency reform late last year, with the State Security Department and the Ministry of Public Security, the frontline agencies dedicated to protection of the regime, paying soldiers 6,000 won each — 3,000 won in average monthly pay plus a 3,000 won bonus.

Soldiers usually received about 3,000 won in the old currency. That this effectively doubled means the currency reform, which exchanged old won for new at a rate of 100:1, has not been able to stop inflation.

Money is also apparently being distributed to workers on collective farms, who had a hard time last year because they failed to raise vegetables and other produce from their own patches to scrape a living for their families due to the “150-day struggle,” a campaign aimed at spurring them to work harder at farms.

According to recent defectors, cooperative farms distributed more than 100,000 won to each household in the new currency late last year to settle accounts and distribute profits. Workers at state-run enterprises were also given 1,000 to 2,000 won each, even though most of their operations are suspended.

One Korean Chinese, who visited Pyongyang recently, said, “Department store shelves are stacked with goods that the state confiscated from market traders in return for nothing on Jan. 1, and they are selling those goods at prices readjusted at the exchange rate of 100 old won for one new won. Huge crowds rushed to buy them, so they ran out of stock immediately.”

But commodity prices skyrocketed. Inflation is soaring as market traders are hoarding goods, anticipating that the real value of the new currency will plummet. According to a North Korean source, 1 kg of rice cost about 30 won right after the currency reform but is now closing in on 1,000 won. The U.S. dollar was exchanged at the rate of 75 won to the greenback right after the currency reform but soared to 400 won in late December. There is speculation that it is now only a matter of time before the rate will reach 3,000 won, the same as the unofficial exchange rate of the old won.

Market traders are angry as they have realized that they were robbed of nearly everything they earned. A former senior North Korean official said, “The latest currency reform is more cruel than the previous reform in 1992. It’s tantamount to the state confiscating 99 percent of people’s money.”

Authorities have been handing out food rations in Pyongyang and other regions since December, but North Koreans already know that the food cannot last them more than a month or two. Urban residents are experiencing particular hardship.

Posted in Black markets, Fiscal & monetary policy, General markets (FMR: Farmers Market), Labor conditions/wages, Ministry of State Security (MPSS, NSA, SSD), Public Distribiution System (PDS) | Comments Closed

Kaesong border communication upgraded

Thursday, December 31st, 2009

According to the Associated Press:

Military officials from the two Koreas communicated through new fiber-optic cables to help facilitate the travel of 330 South Koreans heading to an industrial complex in the North on Wednesday, Unification Ministry spokeswoman Lee Jong-joo said.

South Korea has sent fiber-optic cables and other equipment to the North to help its communist neighbour modernize its military hot lines with the South, she said.

The new hot lines replaced outdated copper cable hot lines that will remain as spare lines, said Lee, the spokeswoman.

The new hot lines will serve as a key mode of communication for border crossings for people travelling to and from the joint industrial complex at the North Korean border town of Kaesong, she added.

I assume the upgrade to fiber optic means that the bureaucracy of border crossing has been computerized. Rather than reading information across the phone line border officials can now send it electronically (including photos) to speed up processing on the North Korean side of the border.

Read the full story here:
Divided Koreas open new, updated military hot lines to facilitate border crossings
Associated Press (via Winnipeg Free Press)
12/29/2009

Posted in Communications, Foreign direct investment, Kaesong Industrial Complex (KIC), Military, Special Economic Zones (Established before 2013), Telephones | Comments Closed

Kaesong production value up, export value down

Tuesday, December 22nd, 2009

According to Yohnap:

Production at the Kaesong complex reached US$27 million in October, up 12.1 percent from $24 million a month earlier, the Unification Ministry said. The October figure also represents a 16.9 percent increase from a year ago.

The overall increase was attributed notably to strong output from machinery and electronics manufacturers, which climbed 26.2 percent and 25.5 percent, respectively. Foodstuff and textile goods also enjoyed 24.9 percent and 8.6 percent increases, respectively.

Exports from the complex, however, shrank 9.1 percent from a month ago to $3.11 million, mostly due to a decline in machinery shipments, according to the ministry.

There are currently 116 South Korean firms operating in Kaesong, matching their capital and technology with the cheap but skilled labor of 42,000 North Korean employees.

Read the full article below:
Production at Kaesong complex rises in October
Yonhap
12/29/2009

Posted in International trade, Kaesong Industrial Complex (KIC), Special Economic Zones (Established before 2013), Statistics, Trade Statistics | 2 Comments »

Official Government-set Prices Are Publicly Announced in the Markets

Thursday, December 17th, 2009

Good Friends (h/t Northeast Asia Matters)
North Korea Today No.316 Hot Topics December 2009

North Korean authorities publicly announced the official national prices in the markets. Contents of announcement are as follow: 22 to 23 won per Kg for rice, 8 won for corn, 12 won for crushed maize, 10 won for corn noodle, 22 won for flour, 9 to 13 won for tofu soy, 50 won for soy oil, 12 won for red bean, 10 Won for string bean, 21 to 22 won for potato starch, 15 to 18 won for millet, 45 won for pork, 50 won for chicken, 40 won for dog meat, 45 won for rabbit meat, 30 to 50 won for whiting fish, 35 to 45 won for sea bass (a set of 2), 50 to 100 won for clams, 60 to 100 won for Atka mackerel, 3 won for an egg, 30 to 40 won for dried pepper, 40 won for powdered-sugar (sugar), 3 won for a cake of tofu, 30 to 40 won for a fresh octopus, 3 won for cabbage, 5 won for radish, 35 to 45 won for a package of food seasoning, 300 to 550 won for a ready-made men’s suit, 350 to 500 won for a ready-made women’s dress, 200 to 300 won for men’s underwear, 250 to 350 won for women’s underwear, 35 won for a pair of men’s jogging shoes, 30 won for a pair of women’s shoes, 200 to 300 won for a pair of men’s shoes, 250 to 400 won for a pair of women’s shoes, 10 50 15 won for market fee, 0.5 won for bicycle storage at market.

Posted in Agriculture, Fiscal & monetary policy, Food, Price liberalization | Comments Closed

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