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North Korea needs to counter the economic impacts of COVID19, but what can it really do?

Friday, April 10th, 2020

By: Benjamin Katzeff Silberstein

Many countries are adopting stimulus measures to counter the economic impacts of the drastic economic slowdown resulting from measures to counter the COVID19 outbreak. North Korea, too, badly needs to counter the likely devastating impacts of its border shutdown to China, but it has no funds to adopt measures even nearly comparable to ordinary stimulus measures. As Yonhap speculates here, the Supreme People’s Assembly today (Friday April 10th) are scheduled to meet and may announce policies to counter the economic impacts, but it’s unclear what they can really do:

North Korea’s rubber-stamp legislature was to hold a once-or-twice-a-year session on Friday, with economic and public health issues expected to take center stage amid its ongoing fight against the novel coronavirus.

The Supreme People’s Assembly (SPA) usually meets in April every year to address the state budget and Cabinet reshuffling, but it has been closely watched from outside for any glimpse into the reclusive state’s stance on foreign affairs, including its stance on denuclearization talks with the United States.

Friday’s meeting, however, is expected to center on discussions of major domestic issues, given that Pyongyang has been making all-out efforts to block the outbreak of COVID-19 on its soil.

North Korea is among just a few countries in the world that claim to have no coronavirus infections, generating speculation that it might be hushing up an outbreak.

Pyongyang has tightened control of its borders with China, where the coronavirus originated in late December. It has also toughened quarantine criteria and restricted the movement of people and goods.

In particular, the border closure with China could weigh on its already moribund economy long crippled by global sanctions, as it depends heavily on the neighboring ally for its trade.

It is unclear whether leader Kim Jong-un will attend the SPA meeting. Observers say that he is unlikely to be present as he was not among deputies elected in March last year to the parliament.

Kim attended last year’s meeting to give a policy speech at the session.

Earlier in the day, state media reported that Kim has supervised a mortar firing drill. It did not provide details on when and where the drill took place, but such military activity is usually reported a day after it happened.

But there have been no state media reports on a politburo and a plenary meeting of the ruling Workers’ Party, which used to be held with Kim in attendance ahead of an SPA session.

Experts say that the North could announce an increase in its budget to improve public health infrastructure and unveil measures aimed at cushioning the impact of its anti-virus campaign on its economy during the SPA meeting.

(Source: “N. Korea set to hold parliamentary meeting amid nationwide virus fight,” Yonhap News, April 10th, 2020.)

The North Korean government doesn’t entirely lack resources, but it doesn’t have the sort of budgetary flexibility that a government needs to launch serious stimulus programs. It could theoretically ease up on restrictions on economic activity, such as decrease fees for market traders (markets are themselves problematic given the risk of the virus spreading there), ease up on permit regimes for various sorts of economic activity, lower mandatory fees and taxes, and the like. This is unlikely to happen, since the state itself already faces serious economic woes, and local-level government institutions likely will not be content with having a crucial source of income curtailed. More to follow after the SPA meeting results are announced.

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Posted in Coronavirus, Health care, International trade, Political economy, Supreme Peoples Assembly | Comments Closed

North Korean public health expert claims zero coronavirus cases

Thursday, April 2nd, 2020

Benjamin Katzeff Silberstein

In an interview with Kyodo earlier this year:

Pak Myong Su, president of North Korea’s State Hygienic Control Board, made the remark in an interview with Kyodo News and other foreign media outlets.

“If such a virus spreads in our country with a small population and a small territory, a serious disaster could not be avoided, in which thousands or tens of thousands of people are deprived of their lives,” Pak said in Pyongyang.

In mid-March, Gen. Robert Abrams, the commander of U.S. forces in South Korea, said at a press conference that North Korea “is a closed-off nation, so we can’t say emphatically that they have cases, but we’re fairly certain they do.”

South Korean media have also reported that many North Koreans have died from the pneumonia-causing virus currently sweeping the world.

Late last month, Japanese Foreign Minister Toshimitsu Motegi told reporters in Tokyo, “If there is no infected person in North Korea, which is contiguous with China and South Korea, it is extremely miraculous.”

Pak stressed that North Korea has stepped up measures to prevent a coronavirus outbreak, including cutting off traffic to and from China and Russia since earlier this year.

He added that citizens have been urged by the country’s health authorities to wear masks when they go outside.

(Source: “N. Korea has no infected people with new coronavirus: expert,” Mainichi/Kyodo, April 2nd, 2020.)

I’ve written here about why this is extremely unlikely to be true, bordering on the impossible.

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Posted in Health care, Ministry of Public Health | Comments Closed

April 1st, 2020: Latest market prices in North Korea

Wednesday, April 1st, 2020

By: Benjamin Katzeff Silberstein

In the past few days, Daily NK updated their market price index. The latest price data was sourced on March 20th, but posted at least a couple of weeks later. A few quick observations:

In general, rice prices continue to decline, although not by very much. The average rice price went down by 1.4 percent from the previous price observation, on March 7th. This is hardly enough to be truly significant. As I wrote on 38North recently, the price drop may not be caused by an increase in supply only, but also by increasing enforcement of price controls by the government.

Foreign exchange rates have appreciate significantly since before the coronavirus border closure, and continue to climb still. The RMB has, interestingly, appreciate much more than the US dollar. The dollar climbed by 1.4 percent in the last price observation compared with late December last year, while the RMB went up by almost ten percent during the same time period. Between March 7th and March 20th, the USD appreciate by 0.55 percent, and the RMB by 1.2 percent. North Korea thereby goes counter to the international trend, where the dollar has appreciated significantly over the RMB. This makes sense, however, since the border closure has cut the supply of Chinese goods drastically, thereby raising their price. A significant share of trade in these goods occurs in RMB, and it is only logical that the price would go up.

More on this during the weeks to come…

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North Korean ships not stopping in Chinese ports

Sunday, March 29th, 2020

Benjamin Katzeff Silberstein

The New York Times reports that North Korean ships that would usually transport goods to Chinese ports are now idle in Nampo:

The Royal United Services Institute satellite analysis shows that on March 3, 139 ships were idled in the Nampo area, which includes the anchorage and several ports, up from 50 ships a month earlier.

The fleet includes vessels previously implicated in sanctions evasion operations, which are often tracked through satellite imagery and aerial or ground surveillance by other states, independent research groups and the United Nations.

The institute’s analysis said the idled ships included some of the “most active and scrutinized oil tankers” used for the illicit import of refined petroleum products such as fuel. For example, the oil tanker New Regent, which had been spotted making unreported deliveries as recently as January 2020, and twice in 2019, according to the United Nations, was seen in Nampo in multiple satellite images. Other ships, too, have been floating unused for weeks, according to satellite imagery provided by Planet Labs, an earth-imaging company in San Francisco, and Maxar Technologies Inc., a space technology company in Westminster, Colo.

(Source: Christopher Koettl, “Coronavirus Is Idling North Korea’s Ships, Achieving What Sanctions Did Not,” New York Times, March 26, 2020.)

As the article points out, coronavirus really is doing what sanctions never fully could. It seems that the only fully confirmed mode of goods transportation between North Korea and China right now are trains (judging by the Rodong pictures of Corona prevention activities), and we don’t know how often they run.

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Of price controls and panic: North Korean market prices under Corona

Friday, March 27th, 2020

By: Benjamin Katzeff Silberstein

(Note: the graphs in this piece are from a shortly forthcoming article on 38 North.)

It’s almost like those mandatory disclaimers that often follow advertisements in the United States, but the statement that all information from inside North Korea is uncertain can sometimes not be repeated often enough. This is especially true in a situation like the current one, where the country’s borders are virtually shuttered, and global anxiety is high to begin with.

With that, let’s take a look at some numbers…

With North Korea’s border closing earlier this year, market prices quickly shot up as consumers most likely hoarded goods in anticipation of future shortages. Particularly curious was the fact that prices seemed to differ so widely between cities, as I wrote about here. This suggested that internal restrictions on movement between localities, a measure the state took to control the spread of coronavirus, were working. A few weeks later, however, both market prices and the differences between cities seemed to go down again.

Differences in rice prices, in percentage, between three North Korean cities, until March 7th. Data source: Daily NK.

So did market prices in general. In the latest price data observation from Daily NK, from March 7th, average rice prices are about 25 percent higher than a year ago, and 29 percent higher than in early December, before the border closure. That’ a lot, but somewhat less than the initial 36 percent increase when the border was closed initially. Even the slightly lower price increase would spell severe difficulties for many North Koreans in buying food. Note: the latest price observation is from March 7th, that is, several weeks ago.

Average rice prices in North Korea, until March 7th. Data source: Daily NK.

So, what happened here? There are two possibilities that I think are more likely and realistic than others. One is that markets overreacted in their initial anxiety. Put simply, people may have thought that supply would become much lower than it ended up being. This is a common mechanism in markets in general. People often react more strongly than called for to anticipated, future changes, and then adapt their economic behavior once it’s clearer what actual conditions of supply and demand are. It’s also possible that the government let up on conditions for imports and trade, easing the burden on supply.

But there is another possibility. Both Rimjingang and Chosun Ilbo have reported that the government has instituted price controls to prevent prices from rising. This was only to be expected, as it is one of the few tools the state has at its disposal to control market anxiety. Price controls, however, are rarely (if ever) effective in the long run in countries such as North Korea. Either trade moves to the black market, or sellers run out of goods as they are forced to sell for less than consumers are willing to pay.

Aside from the two aforementioned reports, there are other potential signs that price controls may be in place. The price difference between Hyesan and Pyongyang/Sinuiju went down to a conspicuously low level, one that is actually lower than normal, a very odd coincidence. It got there only over the span of a few weeks, getting close to the 5,000 won-level reported by Chosun as the price ceiling. As far as currently available information can tell, no conditions changed on the ground. It would be reasonable to assume that at some point, the government may let up on restrictions on trade to ease conditions, but we don’t know whether that has happened yet. Reports of harsh measures against smuggling continue, and such measures would signal to the markets that state enforcement of the border closure remains and will remain harsh. So while in theory it makes sense that prices would go down somewhat after the initial spike, conditions on the ground have not changed noticeably, as far as we know.

So, what might have happened is that at least around March 7th, the government was still somewhat successful at enforcing its price ceiling, at least in parts of the country. One of Chosun’s sources reports that as of March 18th, rice cost 6,300 won per kg in Hyesan, much closer to the initial price level after the border closure. Price ceilings can usually only be enforced for a limited period of time, particularly when real shortages loom of essential products. Prices either rise beyond the ceiling, goods run out, or a black market arises. If the regime is indeed enforcing a price ceiling, and it continues to do so for a long time, perhaps we will see an increase in back-alley markets and other type of economic activity that the government has been relatively successful at curbing by integrating the markets into the official economic system over the past decade and a half or so.

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Posted in Black markets, China, Coronavirus, Economic reform, Health care, Political economy, Price liberalization, Statistics | Comments Closed

Musan mine at less than half capacity due to coronavirus measures

Friday, March 13th, 2020

By: Benjamin Katzeff Silberstein

The Musan mine, already (at least periodically) hit hard by sanctions, now operates at below half capacity, according to Daily NK. Despite the UN sanctions prohibiting countries from importing North Korean mining products, the Musan mine has kept up a certain level of production (after experiencing severe difficulties under harsher Chinese sanctions implementation), exporting mining products to the Chinese Sanhe region. But now with North Korea itself enforcing a virtual border shutdown, exports, too, have stopped:

“The Musan Mine is operated at less than 50% of capacity,” a North Hamgyong Province-based source told Daily NK on Wednesday. “Only two of the five mining areas in the complex are operating at full capacity. The shutdown of the border with China has led to slowdowns in drilling and ‘ore dressing’ [mechanically separating grains of ore minerals from gangue minerals – mineral processing].”

North Korea closed its border to China at the end of January to prevent the spread of COVID-19. The move reportedly ended all smuggling operations along the border and also impacted operations at the Musan Mine, which is located in North Hamgyong Province.

North Korea has been banned from exporting minerals since the United Nations Security Council adopted Resolution 2397 in 2017. The regime, however, has continued to earn large amounts of foreign currency from the sale of iron ore produced in Musan Mine. Daily NK reported in late 2018 [in Korean] that iron ore from Musan Mine was being smuggled to China’s Sanhe region after passing through Hoeryeong.

North Korea and China reportedly ended their joint production of iron ore at the mine following the coronavirus outbreak. Musan Mine now only produces iron ore for domestic consumption, Daily NK sources said.

BLASTING TO MORE PRODUCTION

Rodong Sinmun reported recently that Musan Mine blasted through 400,000 tons of earth on Jan. 2 at Cholsan Peak. Daily NK sources reported that this at expanding production have largely failed because of the lack of equipment and logistics issues.

The Rodong Sinmun claimed that the blasting had been successful and that expansion of production would enable the complex to produce more iron ore. The newspaper also stated that all necessary equipment was acquired and prepared “without issue” and transported to the mine “on time.”

(Source: “Sources: Musan Mine operating at less than half of full capacity,” Daily NK, 3/13/2020, https://www.dailynk.com/english/musan-mine-operating-less-than-half-full-capacity/.)

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North Korean government buys face masks via official smuggling channels

Friday, March 13th, 2020

By Benjamin Katzeff Silberstein

Smuggling exists more or less as an official, regularized trading method in North Korea, so this piece of news is perhaps not all that surprising. The government regards face masks as a strategically vital product, and it is only natural that it would import enough to make sure that at least the elite classes are covered if need be. Daily NK:

“The trade ministry [the Ministry of External Economic Relations] continues to import face masks from abroad,” a Daily NK source in North Korea said on Tuesday. “North Korean trading companies in China are managing the import of the masks following orders from above.”

In short, Daily NK sources have confirmed that the country’s trade ministry is focusing efforts on acquiring face masks and other “disease control supplies” from abroad.

STATE AGENCIES “TAKING THE LEAD”

North Korea’s state-run Korean Central Broadcasting Station reported on Feb. 22 that the Ministry of External Economic Relations along with the Ministry of Foreign Affairs is “taking the lead” in acquiring “prevention and diagnosis supplies.” The report also noted that the Committee for Cultural Relations with Foreign Countries – an outfit that organizes cultural exchanges with other countries – had recently imported 60,000 face masks.

“There are around 100,000 face masks, some 4,500 protective suits and other necessary drugs are imported into the country every ten days,” a source told Daily NK.

“Between midnight and 2 PM, there is a state-run agency that helps bring these items across the border,” he added.

North Korean state-run media continues to run stories saying that authorities are closely monitoring goods imported from abroad.

A Rodong Sinmun article on Monday, for example, stated that the country’s customs agency “stores imported cargos in tightly closed places for 10 days during which it rigidly inspects and sterilizes them according to the specification before handing them over to relevant units in compliance with the procedure and discipline laid down by the state.”

Despite these claims by state media, however, Daily NK sources have confirmed that smuggling of face masks and other items across the Sino-North Korean border continues to occur.

The state-run smuggling operations are also occurring following orders by North Korean Kim Jong Un that anyone engaged in smuggling will face punishment in military courts.

TO MEDICAL STAFF…AND THE ELITE

Items imported from abroad for disease control purposes are reportedly distributed to hospitals and high-ranking officials.

“Most of the items go directly to the medical [disease control] authorities,” one source said. “The rest goes to the leadership and their families.”

(Source: Mun Dong Hui, N. Korea is acquiring face masks via official smuggling operations, Daily NK, March 13, 2020.)

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North Korea tightens scrutiny of imported goods amidst corona pandemic, says Rodong Sinmun

Thursday, March 12th, 2020

Via Yonhap:

North Korea has tightened guidelines on disinfecting imported goods as part of efforts to prevent the new coronavirus from reaching its soil, the country’s main newspaper said Thursday.

The Rodong Sinmun said the country has recently updated its guidelines on quarantine measures and disinfecting imported goods and distributed them to institutions related to health and border controls.

“It is important to place strict controls on imported goods in order to take scientific and preemptive measures,” the paper said, adding that an emergency health committee is “closely watching the worsening situation and the intensifying preventive measures around the world.”

The guidelines laid out regulations on protective clothing and equipment and detailed procedures on disinfecting the interior and exterior of ships, trains and trucks coming into the country. It added that the vehicles must be left for three hours after the disinfection procedure.

In another article, the paper said the country’s ministry of foreign trade is taking disinfection measures three times a day and measuring workers’ temperatures twice a day.

North Korea has not reported an outbreak of COVID-19, which emerged in neighboring China in late December, but it has intensified anti-virus efforts by tightening its borders and toughening quarantine criteria and procedures.

In late February, the newspaper carried a report saying North Korea put in place a 10-day quarantine period for all goods arriving at North Korea’s ports or passing through border bridges as part of efforts to stop the virus from entering the country.

(Source and full article: “N. Korea tightens controls on imported goods over virus concerns,” Yonhap News, March 12, 2020.)

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North Korea’s coronavirus figures almost certainly underreported

Monday, March 9th, 2020

By: Benjamin Katzeff Silberstein

North Korea’s anti-virus measures have been consistently forceful, or even blunt. It is a telling example of the state’s strong caution, or fear, that it even recently refused to take back 20 defectors caught in China and held in Dandong. State media reports have said that close to 10,000 people are under quarantine, and as Yonhap notes, the full figure reaches 10,000 if one includes the 380 foreigners under quarantine in Pyongyang:

North Korea has placed around 10,000 people under quarantine over coronavirus concerns and released about 40 percent of them as they showed no symptoms, according to state media reports.

North Korea has not reported an outbreak of COVID-19, which emerged in neighboring China in late December, but it has intensified anti-virus efforts by tightening its borders and toughening quarantine criteria and procedures.

According to North Korea media reports, Pyongyang has put 2,420 people under quarantine in South Pyongan Province, 3,000 in North Pyongan Province, 1,500 in Kangwon Province and 2,630 in Jagang Province.

The total could exceed 10,000 if around 380 foreigners staying in Pyongyang are included, though Pyongyang has not unveiled official numbers of quarantined people.

The Rodong Sinmun, the official newspaper of the North’s ruling party, said on Monday that quarantine is currently being lifted on people who came into contact with people from other countries in accordance with relevant guidelines.

“To block the flow and spread of the infectious disease, it is important to ensure a complete preventive sealing-off of all quarantine facilities … (as well as to) well establish treatment measures and lift quarantine strictly in accordance with what is stipulated in the guidelines,” the newspaper said.

The paper also emphasized that quarantine is being lifted according to relevant guidelines for foreigners stationed in Pyongyang, public servants, interpreters and drivers at high risk of having been exposed.

(Source: Koh Byung-joon, “N.K. quarantines about 10,000 people for potential infection by new coronavirus,” Yonhap News, March 9, 2020.)

At the same time, reports keep surfacing, mainly through Daily NK, about serious numbers of deaths in the country. For example, according to one of their sources, 200 soldiers have died from the virus in the country. As with all news from North Korea, we should take these with a big grain of salt:

A Daily NK source inside North Korea’s military reported on Mar. 6 that the military’s medical corps had sent a report detailing the impact of COVID-19 on the country’s soldiers to military leaders.

The report stated that 180 soldiers had died in January and February and that approximately 3,700 soldiers are currently under quarantine. According to the report, the soldiers who had died were predominantly stationed on or around the Sino-North Korean border in North Pyongan, Chagang, Ryanggang, and North Hamgyong provinces.

The report came after the military’s leadership had ordered hospitals serving each branch of the military to collect data on the number of soldiers who had died after suffering from high fevers stemming from pneumonia, tuberculosis, asthma or colds. Military leaders also asked the hospitals to report on the numbers of those currently in quarantine.

The report has reportedly caused an uproar in North Korea’s military establishment and has led military leaders to take several measures to prevent the spread of what appears to be COVID-19 infections.

TOO MANY CORPSES TO CREMATE

One key measure the military has implemented is for corpses to be “thoroughly disinfected.” This contrasts with the North Korean government’s order that all hospitals cremate all corpses.

“There’s just too many bodies [to be cremated in the military] and they didn’t want news [of the cremations] to leak outside the military,” Daily NK’s military source explained.

(Source: Jeong Tae Joo, “Sources: Almost 200 soldiers have died from COVID-19,” Daily NK, March 9, 2020.)

And, also from Daily NK:

Some North Koreans living in North Pyongan Province suspect that the government is covering up the death of a man who recently died of symptoms similar to those suffering from COVID-19 infections, Daily NK has learned.

The man reportedly died on Feb. 16 after suffering for a week from a fever and other cold-like symptoms.

“The man had been involved in smuggling across the Sino-North Korean border up until early February. He began suffering from what seemed to be a cold and was taking cold medicine but he failed to get better,” a source in North Pyongan Province told Daily NK on Feb. 23.

The man reportedly continued his smuggling activities even after the shutdown of the Sino-North Korean border in late January.

The head officer at a sentry point along the Sino-North Korean border is expected to be punished severely for turning a blind eye to the man’s smuggling activities, sources said.

PNEUMONIA NOT COVID-19

Local officials in Ryongchon County along with disease control officials began an investigation into the man’s death after holding a meeting on Feb. 17. The officials, however, concluded that the man had not died of a COVID-19 infection.

“There were rumors that the man had died of COVID-19, but local officials said that he had long suffered from bronchial asthma and he had died from pneumonia brought on by the common cold,” the North Pyongan Province source said.

The man’s body was reportedly cremated five hours after his death and his entire family was taken to a local hospital for medical examinations.

Daily NK sources reported that Ryongchon County locals believe that the man could have died from a COVID-19 infection, particularly given that there have been upwards of 100 infection confirmed in Liaoning Province, right across the border from North Korea.

(Source: Jong So Yong, “N. Korean man dies of COVID-19 infection-like symptoms,” Daily NK, 26 February, 2020.)

And so on and so forth. These are just two example out of several similar reports.

The point is not that we should read these death tolls literally. Telling a death from covid-19 from a regular flu would seem almost impossible for those who aren’t medical professionals, and North Korea has a scarce quantity of test kits around. Rather, the point is that the North Korean government’s claims of zero infections and zero deaths simply must be heavily exaggerated. If 10,000 people are held in quarantine, the government likely determines the situation to be so serious not only from what it knows from other countries, but because it has seen direct reasons on its own territory for doing so. The same goes for the warning by North Korean border guards that Chinese who approach North Korean territory along the border will get shot. North Korean human contacts with China are so frequent and so common that it is hard to imagine the country being totally free from the virus at this point.

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Weekly update, March 6th: the coronavirus and the North Korean economy

Thursday, March 5th, 2020

By: Benjamin Katzeff Silberstein

The coronavirus continues to dominate the news cycle and everyday life developments of people around the world, and North Korea is no exception.

The government is taking very, very serious measures to protect the country. Chinese residing in areas along the North Korean borders have been warned not to get too close, or risk being shot at by North Korean border guards. I cannot recall anything similar to this in the past few decades of Sino-Korean relations and border conditions. Reuters:

Residents of the Chinese cities of Jian and Baishan were warned that people who get too close to the border might be shot, according to three people who received the notice, which was reviewed by Reuters.

“We’re told that we may get killed if we get too close to the border area,” said one restaurant owner in Jian, which is separated from North Korea by the Yalu River, declining to be identified given the sensitivity of the matter.

Residents are prohibited from fishing, grazing livestock or throwing rubbish near the river, according to the notice issued this week.

Strict controls are in force domestically as well. I wrote about price divergences between cities a few days ago, a potential sign that North Korea’s internal controls are severely limiting movement between provinces in the country. While this is likely a good thing from a virus prevention point of view, it’s very problematic for North Korean consumers. It may even be a bigger one than the closure of many of the goods transport routes over the Chinese border.

Aside from goods from different provinces not reaching markets in other localities and limiting supply, there’s a broader question looming. What happens with these goods? In China, as restaurants see demand drop to catastrophic lows, ingredients lay idle and rot. North Korea has limited electricity supply and refrigeration is not common in homes, and likely not with market traders in large parts of the country either. When people stock up on goods, they most likely choose those that will not perish easily, such as rice. And what happens with unsold, fresh goods? Are they sold at below-market value, causing losses for farmers down the supply chain, or perhaps in some cases not sold at all because they can’t be transported to the right markets?

North Korea’s quarantine situation is also interesting. State media has said that 7,000 people are under “medical monitoring”, whatever that means, and 3,920 under quarantine. For the quarantine figure, that’s 0.00015 persons per capita (assuming a population of 25 million). By comparison, Denmark has 0.00004 people per capita under quarantine. This is perhaps not surprising as Denmark is a wealthy country, far away from China with good testing  and monitoring capacities. Still, it underscores the point that 3,920 people under quarantine is certainly not nothing. To some extent, authorities may be over-vigilant, but there’s likely a foundation there somewhere.

More to come next week, surely.

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