Archive for the ‘International trade’ Category

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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North Koreans buy more domestically manufactured home electronics

Thursday, April 2nd, 2020

Benjamin Katzeff Silberstein

Kim Jong-un has long sought to make North Koreans less dependent on imports, and buy more domestically manufactured products. According to one recent Daily NK report, the trend toward domestically manufactured goods continues:

North Koreans have long purchased TVs, electric rice cookers, refrigerators, fans and heaters imported or smuggled from China or even South Korea.

South Korean products sold in local markets typically have had their brand names obscured or forged to look like they came from China. Sellers would generally verbally tell buyers where the products really came from.

North Korean products are now increasingly sought out by locals, however, partly because of their cheaper prices and growing variety; other times, they are the only products available because of international sanctions and – more recently – the shutdown of the Sino-North Korean border.

INCREASING PREFERENCE FOR HOMEGROWN PRODUCTS

“There are now TVs branded with the names of North Korean manufacturers like Arirang, Mallima and Yomyong,” a South Pyongan Province-based source told Daily NK on Mar. 31.

“There are a wider variety of North Korean mobile phones available now, too, from the Arirang flip phone to the Pyongyang 2425 smartphone, the Phurun Hanul, the Jindallae series and more,” he added.

Homegrown solar panels, electric bicycles and water purifiers have also been spotted being sold at Pyongsong Market, located in South Pyongan Province near the capital Pyongyang. Although North Koreans still reportedly prefer South Korean electronics products – if they can afford them – many also see Chinese and North Korean products as acceptable alternatives.

Pyongsong Market’s electronics wholesalers typically have a list of products in stock for potential buyers and will lead interested buyers to separate storage facilities to view the products. Now, however, the quantity of homegrown electronics products has reportedly increased significantly at these storage centers.

In the past, Japanese-made products dominated the markets before consumers increasingly turned to products made in China and South Korea. Now consumers are opening their wallets to buy more and more North Korean-made products.

“Families will purchase appliances that consume large amounts of electricity, such as air conditioners, refrigerators and washing machines,” one source told Daily NK. “They’ll purchase the appliances they need according to how many people are in their family, and according to how much they can spend.”

BASHING THE “IMPORT DISEASE”

With the rise of coffee and tea culture in North Korea, locally-manufactured water purifiers and electric kettles have also become increasingly popular.

“Smoke detectors and burglar alarms are a given for city-dwellers, who will sometimes purchase electronic appliances to brew their coffee or tea,” the source said.

“It’s pretty normal for one household to have about five electronic appliances. The better-off households will have, at minimum, a refrigerator, a heater and washing machine. And, given that many women are breadwinners, massage machines for tired muscles, beauty appliances like hair dryers and kitchen appliances are also quite popular,” the source added.

(Source: Kang Mi Jin, “N. Koreans increasingly seek out homegrown electronics,” Daily NK, April 2nd, 2020.)

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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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Some N Korea-China trade stats for 2019

Monday, March 23rd, 2020

By: Benjamin Katzeff Silberstein 

Nikkei Asian Review analyzes some 2019 trade data:

North Korean exports to China increased 10.8% to $216 million, while imports jumped 16.8% to $2.59 billion, the Seoul-based Korea International Trade Association said Thursday.

The trade deficit increased by $350 million, four times the deficit from 2016, before the U.N. imposed heavy sanctions on top North Korean exports like coal and apparel.

Clocks and watches were North Korea’s biggest export to China last year at $49 million. Parts for time pieces ranked high among its imports, and the country is believed to be assembling clocks on contract from China.

(Source: “Wigs and watches keep North Korea’s economy ticking under sanctions,” Nikkei Asian Review, March 20, 2020.)

In reality, things are of course much more complicated than this. At a time when sanctions remain but we still pretty much know that China has reverted to importing certain banned items from North Korea, North Korea’s effective trade deficit cannot really be studied through official data. Likely, imports that come through and are recorded officially correspond, to some extent, to exports flowing outward under the radar.

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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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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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North Korean State Party’s CC meeting: of fired officials and coronavirus efforts

Monday, March 2nd, 2020

By: Benjamin Katzeff Silberstein

On Saturday February 29th, the Political Bureau of the Central Committee of the Korean Worker’s Party held a so-called “enlarged” meeting. According to the KCNA report, the meeting dealt primarily with purges of corrupt officials, and coronavirus measures:

At the enlarged meeting acts alien to the party, abuse of power, practices of privileges, indulgence in bureaucracy, corruption and irregularities revealed among senior officials of the Party Central Committee and officials of the Party cadre training institution were harshly criticized and their gravity and consequences were sharply analyzed.

The Supreme Leader clarified the analysis of the issues by the Party Central Committee and its stand on them, and dealt strong blows at the acts alien to the party and unpopular and anti-socialist acts brought up for discussion at the meeting. He called on all the Party officials and organizations to draw a serious lesson from the recent incident, to make steady efforts to revolutionarize themselves and their units and bring about a new turn in the Party work.

The Political Bureau of the Party Central Committee dismissed Ri Man Gon and Pak Thae Dok from the posts of vice-chairmen of the Party Central Committee.

The meeting adopted a decision to disband the party committee of the Party cadre training base which was involved in the practices of corruption and irregularities, and to impose relevant penalty.

It’s not clear precisely what “strong blows at the acts alien to the party and unpopular and anti-socialist acts”, but presumably it refers to corruption. Corruption is one of the most common acts for WPK-officials to get purged (or fired) over, and the formulations indicate that this is indeed what happened here. Some have suggested it may have had to do with shoddy work in the country’s coronavirus measures, but even reading carefully between the lines, I can’t see enough evidence to back that up. “[A]cts alien to the Party” [비당적 적행위],  I would argue, is a clear statement about specific acts particularly alien to the Party’s values. Shoddy handling of specific policy implementation related to the virus does not fall naturally into that category. Moreover, the antivirus measures were praised at the very same meeting. North Korean politics is full of contrasts and mixed messages, but this would be a stretch too far.

The problem with these methods, of course, is that they do nothing to address the long-term issue of corruption. The WPK (and the North Korean state for that matter) lacks institutions for accountability and independent oversight. There is no proper justice system in any reasonable sense of the term. So scare campaigns and setting examples, like the CC meeting in question did, really is the only avenue available. These measures might have some positive impacts in the short run – we don’t know – but in the long run, they make little difference. Kim Jong-un has ostensibly made anti-corruption a priority, but so far, campaigns and sporadic crackdowns are the only visible results. Corruption is obviously bad for the economy, but if it helps people get around draconian laws (as is the case in North Korea) to do business, it might be a net positive for the economy.

The meeting also dealt with North Korea’s efforts to contain the coronavirus. There’s a lot to say about the text, I’ve highlighted (in bold) the part relating to economic affairs:

Discussed at the meeting were issues of taking nationwide top-class anti-epidemic steps in a more thorough-going way and strictly putting them into practice in order to cope with the viral epidemic spreading rapidly around the world.

In case the infectious disease spreading beyond control finds its way into our country, it will entail serious consequences, the Supreme Leader said, noting that the strong measures taken by our Party and the government from the beginning have been the surest and highly reliable, preemptive and decisive preventive measures as this viral infection spreads so rapidly, its incubation period is uncertain and its contagion route is also scientifically uncertain.

An urgent task at present is to supplement and complement the law on the state emergency anti-epidemic and to readjust state crisis control regulations in an orderly way, the Supreme Leader said, emphasizing that the Presidium of the Supreme People’s Assembly, the Cabinet and other related institutions must further strengthen the state anti-epidemic force immediately and push ahead with the work for supplementing and complementing anti-epidemic means, system and laws based on the experiences gained through the on-going enforcement of preemptive and powerful anti-epidemic measures to cope with infectious disease.

The enlarged meeting also discussed measures to deter the influx and spread of the infectious disease in a scientific, preemptive and lockdown way.

No special cases must be allowed within the state anti-epidemic system, the Supreme Leader said, stressing the need to set up a strict discipline by which all the fields and units of the country unconditionally obey to the command and control of the Central Headquarters for the emergency anti-epidemic work and thoroughly execute instructions from it, and to further tighten the system of reporting to the Party and legal surveillance.

He instructed the Cabinet and the Central Emergency Anti-epidemic Headquarters to seal off all the channels and space through which the infectious disease may find its way, and strengthen check-up, test and quarantine under the work system and order already in place.

The meeting also stressed the issue of tightening economic organization and anti-epidemic work under the prevailing situation and conditions so as to accomplish this year’s goals without fail and to thoroughly ensure the life and security of the people.

It is important for the Party organizations at all levels to have clear understanding of the intention of the Party Central Committee and put it into practice, the Supreme Leader said, urging the need for the Party to provide an impetus so that the Cabinet and the economic institutions at all levels could provide proper economic operation and command under the present situation.

The anti-epidemic measures being taken by us is a crucial state affair for the defence of the people and a heavy responsibility of the Party Central Committee, not just the prevention of the disease, the Supreme Leader said, underlining the need for all to thoroughly carry out the decisions and instructions of the Party Central Committee and direct all-out efforts to the security of the country and the life and safety of the people.

The question is, of course, what this means in practice. There is no doubt that the economy is suffering, and not just in terms of sheer growth numbers or the like. Much of North Korea’s imports from China are blocked due to the border closure, and even smuggling is facing heavy clampdowns. Internal travel and movement of goods is heavily restricted. There is, it seems to me, fairly little that the state can really do to balance this all in terms of economic measures, but of course, the state must tell the population that it is doing things and taking action.

(Source: Korean Central News Agency, “Enlarged Meeting of Political Bureau of C.C., WPK Held,” 29/2/2020.)

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