Archive for the ‘Food’ Category

Tax? What Tax? The North Korean Taxation Farce

Monday, April 5th, 2010

Daily NK
Yoo Gwan Hee
4/5/2010

In North Korea, April 1st is commemorated as “Tax Abolition Day.” Ever since the law, “On Completely Abolishing Taxes,” was ratified through the Supreme People’s Assembly on March 21, 1974, North Korea has claimed both within and without to be the only country in the world that does not collect taxes. However, their claim is only for propaganda purposes, for North Koreans labor under a list of state-imposed taxes and duties which grows longer day by day.

Take the example of electricity. Power distribution center members in every city and town visit households in their region alongside the chairperson of the local People’s Unit, whereupon they collect electricity payments according to the number of electric bulbs and electronic equipment therein. This process is done quarterly. In the late 1990s, the quarterly electricity bill per household in Pyongyang was about 20 won. To reduce costs, of course there were people who removed electric bulbs and hid electronic equipment such as irons whenever the power distribution center had workers in their neighborhood.

Since the 2002 economic management reforms were announced on July 1, however, electricity bills have increased greatly. For families living in luxurious apartments in the Jung-district of Pyongyang with televisions, refrigerators and electric fans, households pay as much as 800 or 900 won per quarter.

After the so-called July 1 Reform Measure, troubles between the power distribution center and the people increased. The North Korean people were understandably displeased with the power distribution center, for it was trying to collect money for a utility whose availability was and remains far from regular.

Next, let’s look at reserve food and organizational expenses. North Korea has nine levels of food distribution. From 100g to 900g is supposed to be distributed per day depending on the level, but for the purpose of stocking up reserves, up to 100g is collected from the people instead. Additionally, people are forced to submit approximately two percent of their salary for organizational expenses.

Next, to support for the construction of historical sites. North Korea emphasizes the “voluntary participation” of the North Korean people under the Party apparatus and workers’ organizations. Construction of historical sites for the idolization of Kim Il Sung and Kim Jong Il is frequently organized. Also, officials often collect money from people in order to support those construction projects of which the cabinet is in charge.

Then there is free education. It is officially called “free education,” but school administration expenses are all covered by students and parents. Students have to collect waste paper, waste iron and waste rubber, or raise rabbits and submit the pelts to school. After 2000, there have even been students engaging in business around markets in order to provide supplies for submission to the school.

Onwards, then, to market stands rental fees. After the July 1 Reform Measure, the amount of tax collected at markets suddenly increased. Market stand rental fees already existed before the July 1 Reform Measure but, after 2002, market management centers started collecting market management tax as well, basing it on each product sold. Noodle sellers paid ten won per day, while soybean curd sellers paid three won.

Market stand rental fees became more systematic as well after general markets opened in late 2003. According to the product being sold and daily sales figures, market management centers charged rental fees. In present-day Nammun Market, Hoiryeong, the stand rental fee is said to have been fixed at 100 won per month.

Separate from the stand rental fee, monthly tax is charged on products for sale in the markets. For example, Nammun merchants pay additional taxes of 300 won for industrial goods, 180 won for pork, 150 for cigarettes, alcoholic drinks and fish, 120 won for food and 100 won for general merchandise.

So, while the North Korean media deliver their diet of propaganda promoting North Korea as the world’s only taxless country, be wise to the reality of the North Korean people suffering under an increasing tax burden.

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DPRK official reaffirms intention to close markets

Sunday, April 4th, 2010

Ugh…I really don’t know what to say at this point.  Depressing.

According to the Associated Press (via Forbes):

“In the early days immediately after the currency change, market prices were not fixed, so markets were closed for some days,” Ri Ki Song, a professor at the Institute of Economy at North Korea’s Academy of Social Sciences, told APTN. “But now all markets are open, and people are buying daily necessities in the markets.”

Ri was provided by the North’s government in response to a request to talk to an official who could explain its economic situation. It is very rare for North Korean officials to discuss such policies with foreign media.

Impoverished yet nuclear-armed North Korea has in recent years allowed some free markets for food and consumer items, while others not sanctioned by the state have also sprung up as the public copes with declining living standards and food shortages.

“Outside Korea, many people have been talking loudly about problems that occurred during the change of currency in our country, but there wasn’t any of the social disorder that they have been talking about,” Ri said. “Now the situation is being stabilized overall, and the economy is functioning well, thanks to some of the measures that have been taken.”

Ri insisted the government’s objective is to phase out markets completely and rely on a state-controlled network of outlets to supply its citizens.

Read the full article here.

There is no shortage of posts on the DPRK government’s growing antagonism towards markets in the last several years

The Heritage Foundation reminds us all that the DPRK has languished at the bottom of the international Index of Economic Freedom for years and asks, “how low can you go?”

The Daily NK tells us that times are pretty tough for many in the DPRK right now:

A source from North Hamkyung Province confirmed as much yesterday in a telephone interview with The Daily NK, saying, “Lower class people, who live from hand to mouth through the markets, have been suffering from the most serious difficulties since the redenomination.”

This is because for around two months the markets were shut down completely, and even after the markets reopened market price ceilings were adopted, so small traders and those who lived by relying on the markets were among those hit hardest, according to the source.

“Those running street-stands, alley market traders, porters and others who live by clinging to the markets mostly lost their money in the redenomination. Although markets have started to get animated again, these people are still facing difficulties due to a lack of seed money.”

The source added, “The food situation is actually dire. Despite the authorities’ program of releasing relief rice to poor households, in reality real distribution for them is not that helpful.” This is because any such state relief program is temporary, and cannot address the poorer classes’ fundamental problems.

He emphasized, “Now, people have started worrying about spring poverty, which comes every year in around May or June. In Onsung, Hoiryeong and Musan in North Hamkyung Province, the rice price has dropped to around 400 won per kilogram, but there are still so many people who cannot even afford to eat corn.”

The source gave the example of one of his acquaintances, whom he called Mr. Lee. He used to live by trading secondhand products in Musan.

Pre-redenomination, Mr. Lee managed around 200,000~300,000 won (in old value) of assets, dealing parts and used bicycle tires with his wife. However, following the currency redenomination of November 30, 2009, he was left with 1,900 won of new currency.

To make matters worse, he had only 100 kilograms of corn, which he had obtained in October. His family has been eking out that corn over the last few months.

Since February, the Musan Market resumed operations, but since prices have been unstable, not many people have wanted to buy. Recently Mr. Lee was forced to sell his one-room house to realize some capital.

As the source concluded, “The most terrible victims of the currency redenomination, market closures and inflation are lower class people in the cities. Nowadays, city residents feel lucky when they have just coarse corn.”

“In May or June, when the spring poverty period begins, the situation of the urban poor class will become even more terrible.”

Here is a satellite image of the Musan Market.

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Threat of confiscation is lowering prices?

Monday, March 29th, 2010

According ot the Daily NK:

The current rice price downturn in North Korea has been caused by the fact that wholesalers and individuals dumped rice and corn in bulk onto the market in order to avoid it being confiscated by the authorities, according to sources inside the country.

A source from North Hamkyung Province reported on the 26th that the rice price in Chongjin had dropped even further.

Recently, the authorities reportedly announced that food distribution would be normalized and that grain stored by individuals would be confiscated. Therefore, citizens started releasing their stored food onto the market in order to avoid confiscation, generating oversupply.

The source said on a telephone conversation with the Daily NK on the 26th, “In the Youth Park Market in Shinam-district, Chongjin, rice is now 480 won and corn 210 won per kilo.

The source said, “The Army security apparatus has been confiscating food stored by foreign currency earning organizations. It is a part of the implementation of their plan to lower food prices to state-designated levels.”

One North Korean resident told The Daily NK last week, “Prices have been fluctuating since the redenomination, but now a notice has been handed down from the Cabinet saying that prices will be stabilized by April 1. It says the Cabinet will deal with this confusion in the people’s economy.”

The source added, “In inspections by the Prosecutors Department of the Ministry of the People’s Armed Forces and Defense Security Command, foreign currency earning apparatus affiliated with military units stationed in Chongjin and another five organizations were revealed to be storing around 260 tons of grains, which was confiscated. Around 90 tons of grain stored by the No. 9 Division was also taken and managers were interrogated by the inspections group.”

With the downturn in food prices, the exchange rate in Chongjin also went down to 690 won to the dollar.

Confiscation Threat Spurs Grain Market Flood
Daily NK
Jin Hyuk Su
3/29/2010

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Economy stabilizes before Supreme People’s Assembly meeting

Friday, March 26th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-03-24-1
3/24/2010

It has been reported that food prices in North Korea have leveled out in the latter half of March. An informant from North Hamgyeong Province told Daily NK on March 21 that “nonglutinous rice is 950 Won (per kilogram), corn is 220 Won (per kilogram), and pork is 1,800 Won (per kilogram).” The same source stated that prices in the Onseong town market, Namyang Market, prices were similar. It appears that the prices have dropped because of the increase in overseas food assistance to the North and the fact that emergency rations are now being sold on markets.

Of course, there is no guarantee that the current prices will hold steady in the future, and there is no shortage of people voicing concerns that with the spring lean season approaching, rising food prices and instances of starvation could be unavoidable. On February 4, North Korean authorities dictated that rice could not be sold for more than 240 Won/Kg, and that corn must be sold for 130 Won/Kg or less. Along with the fall in the cost of rice, foreign currency exchange rates also appear to be falling. On March 21, the Yuan traded for 100 Won, and one dollar sold for 720 Won.

According to Daily NK, in the Nammun Market of Hyeryeong city, glutinous rice sold for 900 Won/Kg, while corn went for 500 Won/Kg. On the 13th of last month, (polished) rice cost 1,200 Won/Kg, while corn sold for 550 Won/Kg. The exchange rate was 1 Yuan:120 Won and 1 USD: 1,00Won.

On March 20, the Korean Central News Agency reported that the second session of the North’s 12th Supreme People’s Assembly would open in Pyongyang on April 9. While the agenda was not revealed, the assembly meets each spring, generally to settle the previous year’s budget and set the spending schedule of the current year. There is no reason to believe this year would be different.

At this assembly meeting, it is also likely that new members of the National Defense Commission, Cabinet, and other high-level administrators will be sworn in. In particular, with the aftermath of failed currency reforms and growing reports of starvation throughout the country, there will likely be new economic measures introduced along with the replacement of some officials.

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Reports of worsening conditions in DPRK

Tuesday, March 23rd, 2010

This week there have been several reports about conditions worsening following the DPRK’s currency reform.  Here are links to some of those stories:

New Signs of Unrest in North Korea?
Peterson Institute
Conversation with Marcus Noland (audio)
March 22, 2010

Resistance against N. Korean regime taking root, survey suggests
Washington Post
Blaine Harden
March 24, 2010

Political Attitudes under Repression: Evidence from North Korean Refugees
Stephan Haggard, Marcus Noland
East West Center Working Paper
No. 21, March 2010

North Koreans fear another famine amid economic crisis
Los Angeles Times
Barbara Demick
3/23/2010

North Koreans fear the country is on the verge of a new famine
Times of London
Jane Macartney
3/20/2010

According to the AFP, the US is ready to provide food assistance but the North Koreans banned assistance a year ago:

The United States would consider resuming food aid to North Korea if Pyongyang moves to lift a year-old refusal of humanitarian assistance, the State Department said Tuesday.

“There are profound needs for the North Korean population, and to the extent that North Korea wants to accept aid from the international community, including the United States, we will be willing to consider that,” department spokesman Philip Crowley said at a daily briefing.

In June 2008, Washington agreed to send 500,000 tonnes of food aid to North Korea, including 400,000 tonnes through the UN’s World Food Program and the remainder through other non-governmental agencies.

In March last year, however, the hermit nation began refusing US food aid, without offering a reason.

“If we (provide humanitarian assistance) in the future, just as we’ve done that in the past, our efforts will be to make sure that the aid actually goes to the North Korean people who need it most and is not diverted to other groups such as the military,” Crowley said.

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Altai to begin supplying flour to North Korea

Tuesday, March 16th, 2010

According to Itar-Tass:

The Altai Territory will supply a test batch of flour to North Korea weighing 2,000 tons. The concern Altaiskiye Melnitsy (Altai Mills) signed a corresponding contract with the foreign trade state amalgamation of North Korea, ITAR-TASS learnt at the enterprise on Tuesday.

“Further increasing of volumes of supplies will mainly depend on the export price of flour,” general director Sergei Klinov said. The currently in force railway tariff from the Altai Territory to the border with North Korea, and this is about 3,600 roubles per ton, exceeds half the cost of flour in the export price structure. In such a situation, the issue of quality may become secondary for North Korea, and it will continue buying flour in China.”

Read the full stoy here:
Altai to begin supplying flour to North Korea
Itar-Tass
3/16/2010

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DPRK ban on yuan keeps driving exchange rate higher

Friday, March 12th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-03-12-1
3/12/2010

As the spring lean season approaches, the black market exchange rate for North Korean Won continues to grow, while the prices of rice and other necessities are increasing proportionately. Immediately following last year’s currency reform (November 30), rice was sold at 20 Won per Kg, while it cost 400~600 Won at the end of January and has grown to as much as 1000 Won per Kg in early March. In other words, the cost of rice has jumped 50-fold since the currency reform, negating most effects of the ‘100 to 1’ devaluation reform in just a few months.

The online magazine Daily NK reported, “In the North Pyongan Province area of Sinuiju, a kilogram of rice, which cost 400 Won at the end of last month, cost 800 Won on the 2nd, and 1000 Won on the 3rd. It is being said that the in the end, the price of rice will rise to pre-reform prices (of 2,500 Won per Kg).” The shortwave radio broadcaster Open Radio for North Korea reported similarly, stating, “North Korea’s rice prices, which were around 400 Won per kilogram at the end of February, shot up to 1000 Won on the 3rd of this month.”

More than anything, the reason North Korea’s rice price is doubling weekly is the plummeting value of its currency in relation to the PRC Yuan and U.S. dollar. In January, the (North) Korean Trade Bank set the official exchange rate for Yuan at 14.19 Won and for USD at 30 Won. However, according to Daily NK, the black market exchange rate for U.S. currency jumped from 1200 Won per USD at the end of February to 2100~2500 Won by March 3. Open Radio for North Korea reported that in Hyeryong, North Hamgyong Province, one Yuan traded from 80 Won on the black market February 25, jumped to 120~150 Won by the 28th, and traded for 270 Won at the beginning of March, tripling in just three days. It appears that the skyrocketing prices of food and goods in North Korean markets is directly related to North Korean authorities’ measures to control foreign currency, and Chinese Yuan, in particular.

Confidence in the value of North Korean currency has plummeted, and North Koreans are scrambling to grab up foreign capital as rumors circulate of further currency reform. Residents are trying to get their hands on Chinese Yuan, but North Korean authorities are working to prevent it due to concerns of Chinese dominance over the North’s economy. In order to block Chinese inroads into the North Korean economy, the government has banned the import of Chinese currency, and this is a major factor driving North Korean inflation today.

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DPRK food imports from China triple in January

Friday, March 12th, 2010

According to Yonhap:

North Korea brought in 13,834 tons of grain from the neighboring ally in January, a 3.6-fold increase from 3,869 tons in January last year, said Kwon Tae-jin, a senior researcher on the North’s agricultural sector at the South’s Korea Rural Economic Institute in a posting on his blog.

Rice accounted for about 61 percent or 8,425 tons of the North’s grain import from China, followed by corn with 3,448 tons, beans with 1,553 tons and wheat with 304 tons, Kwon said, citing data from the Korea International Trade Association.

“The big rise in imports of corn and beans, which the North didn’t bring in last year, appears to be not only because corn harvests were not good, but it also suggests the North increased imports over concerns about possible food shortages,” he said.

Kwon also said that the North’s regime could have increased imports to enlarge state food rations after last year’s currency reform caused strains on the country’s food supply system.

North Korea has relied on foreign handouts to feed its 24 million population after natural disasters and mismanagement devastated its economy. The situation worsened in recent years as South Korea halted regular food aid to the North after President Lee Myung-bak took office in early 2008 under a policy to link aid to Pyongyang’s process in ending its nuclear weapons programs.

… 

The U.N. food agency, Food and Agriculture Organization, said early this month that the North is expected to be short of about 1-1.2 million tons of food this year.

I think the data for this story came from this KITA web page, but I can’t be sure since my Korean is exceptionally limited. Here is a description of the KITA page in English.

On a personal note, I wish the major South Korean media outlets  would get into the habit of posting links to their sources.  It is not difficult to do this.  

Read the full article here:
N. Korea’s food imports from China more than triple in January: expert
Yonhap
3/12/2010

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Collective or Farmer: Land Ownership in North Korea

Wednesday, March 10th, 2010

Daily NK
Yoo Gwan Hee
3/5/2010

North Korea’s “Land Reform Law” was signed into law on March 5th 1946, and for a while it offered North Korea a way to produce enough food to feed its people.

The following are the basic contents of the law as implemented by the North Korean Provisional People’s Committee, which was led by Kim Il Sung.

Those Japanese and Korean landlords who possessed more than 50,000 square meters of land were to have it expropriated and distributed to existing tenant farmers for free, whilst the existing tenant farming system was to be abolished. The basic principles of the law were land expropriation without compensation and land distribution for free to former peasant tenants. However, those owning more than 50,000 square meters of land but without tenant peasants were excluded.

In accordance with the provisions of Article 5 of the law, the Committee granted farmers ownership, stating, “All expropriated land is to be distributed to farmers for free.” However, post-distribution use of the land was restricted; Article 10 of the law prohibited using land as collateral in lending, the selling of land or subletting to tenants. As the law itself puts it, “The distributed land cannot be given over to tenant farming and/or used as collateral.”

At the time of the law’s enacting, Korea had been liberated from Japanese colonial rule, but around 58 percent of arable land was still owned by a minority of pro-Japanese landlords constituting just four percent of the population. Meanwhile, most North Koreans in 1946 were farmers, 80 percent of all farmers were extremely poor, and they represented a majority of the total North Korean population. Naturally, the new law was very popular. It was, after all, an opportunity for the Communist Party to appeal to the masses. The political situation was especially complex; a country divided between Soviet-occupied North and American-occupied South, political factions coalescing around different parties, and factions emerging within the Party itself.

In North Korea, the North Korean Provisional People’s Committee and the Communist Party led land reform by organizing 90,697 members into 11,500 farming committees in 1946. They also organized 210,000 farmers aged 18-35 into a semi-military organization, the so-called “self-defense forces,” who supported the projects of the farming committees. During three weeks of land reform, 98 percent of confiscated land was distributed to farmers; poor farmers suddenly became the landlord of up to 13,200 square meters of land. Thereafter, they tended to farm hard and gave their allegiance to the Party.

The farming committee members were instrumental in carrying out the land reform, mostly by aiding in distribution and record keeping. Committee members subsequently became Communist party members and supported the regime at the regional and local level. Consequently, the number of party members rose from 4,530 in December 1945, to 26,000 in April 1946 and 356,000 by June 1946. The success of the land reform consolidated the authority of the North Korean Provisional People’s Committee, and resulted in successful elections for the North Korean Provisional People’s Committee in February 1947 at the local level.

However, following the birth of the North Korean state, individual ownership of land was ended by another national project. The collective farming system, implemented over the course of 1954-1958, resulted in farmers becoming employees on collective farms. The pretext for the collective farming system was communal ownership under the socialist system, but in reality it was a way to realize state control. Article 5 of the Land Reform Law was abolished and the farmers’ dreams of personal and equitable land ownership were swept away in the name of socialist modernization.

Ultimately, the inefficiency and unjust nature of the collective farming system combined with other factors resulted in the March of Tribulation in the late 1990s and the continuing hardships of the average North Korean family today.

Nowadays, farmers tend to solve their food security problems not by working hard on the collective farms, but by farming their own fields around their houses or on steep mountainsides. Their private production is, of course, relatively greater than that of the collective farms.

The way to solve the food crisis is, of course, quite simple; return the land back to the farmers. The North Korean authorities know that private ownership of land is the best way in practice to solve the food problem, but they fear what this might mean for the regime’s viability.

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S. Korea to send powdered milk to N. Korea: Red Cross

Tuesday, March 9th, 2010

According to Yonhap (3/9/2010):

South Korea’s Red Cross said it will send 20 tons of powdered skim milk to North Korea on Wednesday as part of humanitarian aid to the impoverished neighbor.

The aid worth 156 million won (US$137,000) will be delivered on two 11-ton trucks across the inter-Korean border and unloaded in the border town of Kaesong, the Red Cross said in a release.

In January, North Korea accepted a proposal by the South to provide powdered milk along with other types of aid as humanitarian assistance.

Photo in the Hankyoreh.

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