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What explains North Korea’s puzzling price stability?

Friday, July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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Posted in Agriculture, Black markets, Economic reform, General markets (FMR: Farmers Market), International trade, Market prices, Political economy, Statistics | Comments Closed

North Korea gearing up for hard times

Friday, July 10th, 2020

By: Benjamin Katzeff Silberstein

An editorial in today’s Rodong Sinmun emphasizes that fighting the “global pandemic” is more important than economic construction. For Korean-speaking readers, the message comes near the end of the editorial on Friday July 10th, and reads:

그것은 인민들의 생명과 건강을 보호하고 증진시키는것을 최급선무로, 가장 영예로운 혁명사업으로 간주하고있기때문이다.그 어떤 경제건설성과보다 대류행전염병의 침습을 막는것을 더 중요하게 여기고 이 사업에 최선을 기울여야 한다는것이 우리 당의 요구이다.

(Source: 김병진, “인민의 생명안전을 굳건히 지키는것은 우리 당의 제일중대사,” Rodong Sinmun, July 10th, 2020.)

This is not a new message, and it’s been re-stated in various forms in North Korean state media over the past few months. As I write in this article at 38 North, the recent emphasis on the chemical industry carries the same message: don’t expect any major changes in the external economic environment anytime soon, whether it be in conditions relating to sanctions or Covid-19.

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

More anti-smuggling measures by the North Korean government

Wednesday, July 1st, 2020

By Benjamin Katzeff Silberstein 

The North Korean government is reportedly clamping down even further on smuggling across the Chinese border. As Daily NK notes, it’s a measure partially directed against corruption, which will most likely just increase bribery amounts. It’s also part of a broader state drive to assert its power over economic activity. Daily NK:

North Korean authorities recently ordered that ships travelling near the Sino-North Korean border must have a security official on board as part of efforts to crack down on smuggling, Daily NK has learned.

“The order concerns ships travelling along the Yalu River and states that they must have a Ministry of State Security [MSS] agent on board,” a source in China told Daily NK on June 25. “The order applies to all ships, regardless of whether they are container ships or fishing boats, and irrespective of their affiliation or purpose.”

Earlier this month, the MSS announced that anyone caught engaging in criminal activity near the border, including smuggling and attempting to defect, will be subject to strong punishments rather than rehabilitative measures, such as time at a forced labor camp.

The announcement of several measures pertaining to illegal activity near the border in the space of a month demonstrates how sensitive North Korean authorities are to smuggling and information leaks in the area.

BREAKING CORRUPTION

The order is also aimed at preventing corruption between local security officials and smugglers, according to the source.

Since it is common for smugglers to bribe local security officials, the MSS will reportedly send agents from the central government rather than local officers to work on the ships.

Smugglers say that the new order will only lead to more expensive bribes.

“You can earn up to RMB 10,000 [around USD 1,412] a day taking goods across the Yalu River,” the source said. “Because there’s so much money to be made, the measures won’t stop the smuggling. Smugglers will just have to pay higher bribes to the security officials.”

(Source: Jang Seul Gi, “N. Korea focuses on ending ship-based smuggling on border,” Daily NK, June 29, 2020.)

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Posted in China, Illicit activities, International trade, Political economy, Sanctions | Comments Closed

North Korea strengthens camera surveillance along the Chinese border

Tuesday, June 30th, 2020

Benjamin Katzeff Silberstein

This is part of a very interesting trend, of surveillance in North Korea going more high-tech. Border security under Kim Jong-un has been a high priority, resulting in a significant drop in the number of defectors reaching South Korea. Recall, as the article does, that this is but one of several purchase rounds of surveillance equipment from China in recent years. It’s also part of a government drive to strengthen control overall – of economic and social trends and activities:

“The equipment was purchased from China in mid-May and cost approximately RMB 20 million [around USD 2,825,497],” a source based in China told Daily NK on Wednesday.

“The camera system will be set up in areas where smuggling activities are common – not across the entire border,” he continued, adding, “The installation of the system will begin in late June.”

Given that the cameras will only cover a limited area on the border, the high price tag suggests two possibilities: 1) the new system will film in higher definition than existing camera systems; or, 2) the system is so advanced that it can detect even the slightest of movements.

There is the possibility that the installation of the new system is part of preparations to resume trade between China and North Korea, namely by further cracking down on smuggling activities by individuals.

“The purchase of the new system shows that North Korea wants to stamp out these smuggling activities to ensure only [official] Sino-North Korean trade is allowed across the border,” the source speculated.

The source noted that North Korean officials believe that smuggling activities conducted by individuals are a key way information and illicit goods enter and exit the country.

(Source: Mun Dong Hui, “N. Korea to install new surveillance cameras on Sino-NK border,” Daily NK, 26 June, 2020.)

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Posted in China, Communications, Political economy, Statistics, Surveillance | Comments Closed

The North Korean economy is doing badly, but keep some perspective

Tuesday, June 23rd, 2020

By: Benjamin Katzeff Silberstein

Sanctions and Covid-19 have fused together to put the North Korean economy in what can only reasonably be described as an awful situation. Trade first plummeted through sanctions, and then even further because of North Korea’s and China’s anti-Covid19 measures. And the fall continues, as these figures in Hankyoreh show:

Figures from the Korea International Trade Association (KITA) and Chinese customs authorities reviewed on June 18 show a major drop in the value of North Korean goods being exported to the Chinese market: US$10.7 million in January and February (-71.7% year on year), US$600,000 in March (-96.2%), and US$2.2 million in April (-90%). The value of North Korean exports to China, which stood at US$2.63 billion in 2016, has fallen since economic sanctions were toughened, decreasing to US$1.65 billion (-37.3%) in 2017 and US$195 million in 2018 (-88.2%). Exports rebounded in 2019, to US$285 million, but that was still less than a tenth of the value of exports in 2016.

But how bad are things?

Bloomberg ran an article yesterday with the angle that the North Korean economy is the “worst” in two decades, and that this is why the country is lashing out against South Korea with renewed vigor. To support the former claim, it cites figures claiming that the country’s economy will contract by a total of 6 percent this year due to the combination of sanctions and Covid-19.

But how reasonable is this take?

There is no doubting that things are bad, but some context is badly needed. One of course cannot equate an economic contraction with the overall situation. (Never mind that any number on this will be qualified guesswork at best.) A contraction is only the economy shrinking, and it means nothing if we don’t know what the starting point is. In 1997, North Korea was perhaps at the height of a devastating famine, after the economy crumbled following the collapse of the Soviet Union, and China vastly scaling back support.

Today, North Korea may be in an economic crisis of sorts. But it entered it on the back of several years of steadily increasing exports to China. These exports, in fact, grew by more than a factor of ten between 1998 and the record year of 2013. So the situation is so different that a comparison is hardly meaningful.

This is also true for the food situation. According to numbers from the World Food Program and the Food and Agriculture Organization, whose data is questionable but highly valuable, food production stood at 3.3 million tonnes in 2008, not an unusually low figure for the time. Contrast this with the projection that this year’s harvest will be 4.6 million tonnes. Not great, lower than it should be, lower than a few years ago, yes. But still not nearly the level of the disaster years.

Also, it is crucial to remember that even in ordinary times, a not insignificant proportion of trade with China occurs off the books. Throw an increasingly lower Chinese sense of caring what the US thinks about its sanctions implementation into the mix and you’ve got, well, likely a lot more trade happening under the radar. This is what news reports from inside North Korea have been saying for quite a while.

Not that things aren’t bad, or that North Korea’s recent actions have to do with sanctions (they almost certainly do). But don’t forget about context or proportions.

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Posted in Agriculture, China, International trade, Political economy, South Korea, Statistics | Comments Closed

North Korean state attempting to curtail ideological contamination of citizens abroad with TV box

Wednesday, June 10th, 2020

Benjamin Katzeff Silberstein

North Koreans living abroad are increasingly pressured to buy the Manbang IPTV boxes, to ensure that they can keep watching domestic TV and follow the riveting reports of Kim Jong-un’s guidance visits and other activities while abroad, Daily NK reports:

North Korean authorities are pressuring overseas residents of China to purchase a domestically-made IPTV set-top box as part of efforts to strengthen ideological education, Daily NK has learned.

“The North Korean embassy to China is selling IPTV set-top boxes to embassy staff and trade representatives at RMB 2,000 [around USD 282] per box. There is a lot of pressure to buy the boxes, which places a substantial burden on those who have recently been struggling to make ends meet,” a China-based source told Daily NK on June 8.

North Korea has been developing and selling a set-top box called “Manbang” since 2016. Manbang is capable of playing TV broadcasts in real-time along with videos-on-demand (VODs).

The state-run outlet DPRK Today described Manbang as an “IT platform” that allows businesses or households subscribed to North Korea’s intranet network to view various broadcasts real-time, as well as re-watch programs that have already aired.

The source pointed out that forcing North Korean citizens abroad to purchase the set-top box has more to do with strengthening ideological education than making money.

“The set-top box allows North Korean authorities to provide educational programs to North Koreans living in China, including embassy staff and traders,” the source told Daily NK. “[The reason the authorities are pressuring people to buy the devices] is because they think that there are declining levels of loyalty and ideological fervor among those living in China.”

The recent push to sell the devices may also be part of efforts by North Korean authorities to provide overseas residents with devices capable of broadcasting only North Korean programs. Many North Koreans living abroad reportedly watch foreign TV in secret.

North Korean authorities are also checking to see whether people living in China are watching the various ideological education programs provided by the state, according to the source.

“The leadership has instructed that criticism sessions should include discussions on whether people are using the set-top boxes,” the source told Daily NK, adding, “North Korean officials will even go as far as calling up individuals to ask about the broadcasts and make sure they are being watched.”

Manbang features reports on North Korean leader Kim Jong Un’s activities, as well as dramatized versions of Kim Il Sung’s memoirs. Videos relating to Kim family history are also available in the device’s VOD platform.

(Source: Mun Dong Hui, “N. Korean citizens in China pressured to buy IPTV set-top boxes,” Daily NK, June 10th, 2020.)

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Posted in Communications, Computing/IT, Internet, Political economy | Comments Closed

Autarky, self-reliance and urban privilege in Kim Jong-un’s June politburo remarks

Monday, June 8th, 2020

By: Benjamin Katzeff Silberstein

On Monday June 8th, the Korean Worker’s Party politburo held a meeting. Kim Jong-un made several interesting remarks about the overall state of the economy, as Reuters reported here. The full Rodong Sinmun recounting of Kim’s statements is interesting and worth reading in its entirety. More and more state rhetoric seems to presume autarky as the default approach for economic development which is somewhat worrying, but perhaps just a reflection of where the country’s economic conditions stand as of now.

It’s also interesting to note Kim’s mention of the situation specifically in Pyongyang. Perhaps he means to signal to the political elites that he is looking out for their interests and quality of life, and that things will improve. What that means for the rest of the country is less clear. Pyongyang is symbolically important, but the growing disparity between the capital city and the rest of the country should concern the government.

Rodong’s rendition below, in both the original Korean and an English translation.

Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un

The 13th Political Bureau meeting of the 7th Central Committee of the Workers’ Party of Korea (WPK) was held on June 6 and 7 at a time when the entire Party, the whole country and all the people have vigorously turned out in the general offensive for glorifying the 75th founding anniversary of the WPK as the great festival of victors true to the great idea and strategy of the Party for making a breakthrough head-on and its action program.

Kim Jong Un, chairman of the WPK, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the armed forces of the DPRK, was present in the meeting.

Attending the meeting were members and alternate members of the Political Bureau of the C.C., WPK.

Vice-premiers of the Cabinet, some chairpersons of provincial party committees and leading officials of committees and ministries were there as observers.

Upon authorization of the Political Bureau of the C.C., WPK, Supreme Leader of the Party, state and armed forces Kim Jong Un presided over the meeting.

The meeting discussed in depth some crucial issues arising in further developing the self-sufficient economy of the country and improving the standard of people’s living.

Discussed as the first agenda items were some urgent problems arising in developing the chemical industry of the country in a well-defined framework.

He indicated orientation and way to reconstruct the chemical industry as required by Juche and modernity and put it on a track of sustainable development.

Repeatedly stressing that the chemical industry is the foundation of industry and a major thrust front of the national economy, he recollected that the Party, regarding the chemical and metallurgical industries as twin pillars of the self-supporting economy, set forth the policy of founding the C1 chemical industry to suit to the specific conditions of the country and to meet the world’s trend at its Seventh Congress and has since pushed forward with the work.

Recalling that the Fifth Plenary Meeting of the Seventh Central Committee of the Workers’ Party of Korea discussed the issues of establishing the C1 chemical industry and of building the fertilizer production capacity as core points in developing the chemical industry, the Supreme Leader clarified the plan and will of waging a bold struggle to put the overall chemical industry on a Juche and modern basis.

The premier of the Cabinet made a report on the review by the scientific group of the scientific and technical guarantee and economic efficiency of founding C1 chemical industry, and the present situation of the chemical industry.

The meeting heard suggestions on earlier completion of founding C1 chemical industry and had in-depth discussion of issues of opening a broad avenue to the development of chemical industry.

The chemical industrial field has to be activated first to propel and guarantee the economic development of the country, the Supreme Leader said, setting forth immediate tasks for propping up the chemical industry as a whole.

He stressed the need to give top priority to increasing the capacity for producing fertilizer, to begin with, in the chemical industrial field and push forward this work and put particular emphasis on promptly settling scientific and technological issues of founding potassic fertilizer industry based on our own raw materials.

Indicating orientation and immediate goal for energizing existent chemical factories, the Supreme Leader pointed out the need to conduct in a far-sighted way the work to explore chemical industrial field based on new raw materials.

He underlined the need to actively propel the work to perfect and update in a modern way the structure of sectors of the chemical industry.

He clarified that the new structure of sectors of Juche-based chemical industry should be multi-lateral production system, which is saving energy, labor and natural resources and which is technology-intensive and development-and-creation-oriented, that produces nonstop all kinds of chemical goods enough to meet demand thoroughly based on locally available raw and other materials.

He called for building reliable national level scientific research force, actively pushing forward the development of catalyst and laying a material foundation for developing catalyst technology, catalyst industry.

He stressed the importance to carry out substantial work to build talent force in chemical industrial field and to bring up a greater number of talents of practical type who are development-and-creation-oriented in the field of education.

As the second agenda item the meeting discussed immediate issues of ensuring living conditions for citizens in the capital city.

Pointing out in detail the issues that have to be urgently settled to ensure living conditions of citizens in the city, the Supreme Leader stressed to take strong state measures for ensuring the living conditions of people including the construction of dwelling houses.

Important issues for settling issues arising as regards the living conditions of Pyongyang citizens were discussed at the meeting.

A resolution on the first and second agenda items was adopted with full approval at the meeting.

As the third agenda item, the meeting examined before ratification the suggestion on modifying some rule-related matters arising in the present party work and reflecting them in a draft amendment to the party rules.

The fourth agenda item was an organizational matter.

There was a by-election of an alternate member of the Political Bureau of the WPK Central Committee. Kim Yong Hwan was by-elected as an alternate member of the Political Bureau of the WPK Central Committee.

Members and alternate members of the WPK Central Committee were recalled and elected to fill vacancies. Ko Kil Son, Kim Jong Nam, Song Yong Gon were by-elected as members from alternate members while Ri Jae Nam, Kwon Thae Yong and Kwon Yong Jin as members of the WPK Central Committee.

Rim Yong Chol, Kang Il Sop, Sin In Yong, Ri Kyong Chon, Kim Ju Sam, Kim Jong Chol, Choe Kwang Jun, Yang Myong Chol, Kim Yong Chol, Pak Man Ho were by-elected as alternate members of the WPK Central Committee.

The 13th Political Bureau meeting of the 7th Central Committee of the WPK marked an important occasion in further consolidating the foundation and potential of the self-supporting national economy, giving top priority to the people’s dignity, rights and interests under the uplifted banner of people-first principle and opening up a broad avenue to improving the standard of people’s living to meet the requirements of the prevailing situation of the revolution.

(Source: Political News Team, “Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un,” Rodong Sinmun, June 8th, 2020.)

조선로동당 중앙위원회 제７기 제１３차 정치국회의 진행

우리 당의 위대한 정면돌파사상과 전략, 실천강령을 높이 받들고 당창건 ７５돐을 승리자의 대축전으로 빛내이기 위한 전당적, 전국가적, 전인민적총진군의 불길이 세차게 타번지고있는 속에서 조선로동당 중앙위원회 제７기 제１３차 정치국회의가 ６월 ７일에 진행되였다.

조선로동당 위원장이시며 조선민주주의인민공화국 국무위원회 위원장이시며 조선민주주의인민공화국무력 최고사령관이신 우리 당과 국가, 무력의 최고령도자 김정은동지께서 정치국회의에 참가하시였다.

정치국회의에는 조선로동당 중앙위원회 정치국 위원, 후보위원들이 참가하였다.

내각부총리들과 일부 도당위원장들, 위원회, 성 책임일군들이 방청으로 참가하였다.

당중앙위원회 정치국의 위임에 따라 김정은동지께서 회의를 사회하시였다.

정치국회의에서는 나라의 자립경제를 더욱 발전시키며 인민들의 생활을 향상시키는데서 나서는 일련의 중대한 문제들이 심도있게 토의되였다.

첫째의정으로 나라의 화학공업을 전망성있게 발전시키는데서 나서는 당면한 몇가지 문제에 대하여 토의하였다.

경애하는 최고령도자동지께서는 화학공업의 구조를 주체화, 현대화의 요구에 맞게 개조하고 지속적인 발전궤도에 올려세우기 위한 방향과 방도를 밝혀주시였다.

경애하는 최고령도자동지께서는 화학공업은 공업의 기초이고 인민경제의 주타격전선이라고 거듭 강조하시면서 우리 당이 화학공업을 금속공업과 함께 자립경제의 쌍기둥으로 내세우고 당 제７차대회에서 우리 나라의 실정과 세계적추세에 맞게 탄소하나화학공업을 창설할데 대한 방침을 제시한 후 그 사업을 본격화하여온데 대하여 말씀하시였다.

경애하는 최고령도자동지께서는 당중앙위원회 제７기 제５차전원회의에서 화학공업발전의 핵심사항으로 탄소하나화학공업창설과 비료생산능력조성문제를 취급한데 대하여 언급하시면서 화학공업전반의 주체화, 현대화를 실현하기 위한 투쟁을 통이 크게 벌려나갈 구상과 의지를 표명하시였다.

회의에서는 내각총리가 탄소하나화학공업창설의 과학기술적담보와 경제적효과성을 재검토심의한 과학그루빠의 사업정형과 화학공업부문의 현 실태에 대한 보고를 하였다.

회의에서는 탄소하나화학공업창설을 다그쳐 끝내기 위한 의견들을 청취하고 화학공업발전의 새 활로를 열어놓기 위한 문제들을 진지하게 협의하였다.

경애하는 최고령도자동지께서는 나라의 경제발전을 추동하고 담보하기 위해서는 화학공업부문이 먼저 들고일어나야 한다고 하시면서 화학공업전반을 추켜세우기 위한 당면과업들을 제시하시였다.

경애하는 최고령도자동지께서는 화학공업부문에서 무엇보다도 비료생산능력을 늘이기 위한 사업을 최우선적인 문제로 보고 대하며 이 사업을 강하게 밀고나갈데 대하여서와 우리의 원료에 의거한 카리비료공업을 창설하는데서 나서는 과학기술적문제들을 시급히 해결할데 대하여 특별히 강조하시였다.

경애하는 최고령도자동지께서는 현존화학공장들을 활성화하기 위한 방향과 당면목표를 제시하시고 새로운 원료에 의거하는 화학공업분야를 개척하기 위한 사업도 전망성있게 벌려나갈데 대하여 지적하시였다.

경애하는 최고령도자동지께서는 화학공업의 부문구조를 완비하고 현대적으로 개건하기 위한 사업을 적극 추진할데 대하여 강조하시였다.

경애하는 최고령도자동지께서는 국내원료와 자재에 철저히 의거하여 각종 화학제품들을 수요대로 중단없이 생산해내는 에네르기절약형, 로력절약형, 자원절약형, 기술집약형, 개발창조형의 다방면적인 생산체계를 갖추는것이 주체화된 화학공업의 새 부문구조로 되여야 한다고 천명하시였다.

경애하는 최고령도자동지께서는 국가적인 과학연구력량을 튼튼히 꾸리고 탄소하나화학공업에 쓰이는 촉매개발을 적극 다그치면서 촉매기술, 촉매공업을 발전시키기 위한 물질적토대를 갖출데 대하여 지적하시였다.

경애하는 최고령도자동지께서는 화학공업부문의 인재력량을 꾸리기 위한 사업을 착실히 해나가며 교육부문에서 개발창조형의 인재, 실천형의 인재들을 더 많이 키워낼데 대하여 말씀하시였다.

정치국회의에서는 둘째의정으로 수도시민들의 생활보장에서 나서는 당면한 문제들이 토의되였다.

경애하는 최고령도자동지께서는 수도시민들의 생활보장에서 시급히 해결해야 할 문제들을 구체적으로 지적하시면서 살림집건설을 비롯한 인민생활보장과 관련한 국가적인 대책을 강하게 세울데 대하여 강조하시였다.

회의에서는 평양시민들의 생활에서 제기되는 문제들을 풀기 위한 중요문제들이 토의되였다.

정치국회의에서는 첫째의정과 둘째의정에 대한 결정서가 전원일치로 채택되였다.

정치국회의에서는 셋째의정으로 현행당사업에서 제기되는 일련의 규약상문제들을 일부 수정하고 당규약개정안에 반영할데 대한 의견을 심의비준하였다.

정치국회의에서는 넷째의정으로 조직문제를 토의하였다.

당중앙위원회 정치국 후보위원을 보선하였다.

김영환동지를 당중앙위원회 정치국 후보위원으로 보선하였다.

당중앙위원회 위원, 후보위원들을 소환 및 보선하였다.

고길선동지, 김정남동지, 송영건동지를 당중앙위원회 후보위원에서 위원으로, 리재남동지, 권태영동지, 권영진동지를 당중앙위원회 위원으로 보선하였다.

림영철동지, 강일섭동지, 신인영동지, 리경천동지, 김주삼동지, 김정철동지, 최광준동지, 양명철동지, 김영철동지, 박만호동지를 당중앙위원회 후보위원으로 보선하였다.

조선로동당 중앙위원회 제７기 제１３차 정치국회의는 조성된 혁명정세의 요구에 맞게 자립경제의 토대와 잠재력을 더욱 튼튼히 다지며 인민대중제일주의의 기치높이 인민의 존엄과 권익을 최우선, 절대시하고 인민생활향상의 활로를 열어나가는데서 중요한 계기로 된다.

(Source: Ponsajŏngch’ibodoban, “Chosŏllodongdang Chungangwiwŏnhoe Che７ki che１３ch’a Chŏngch’igukhoeŭi Chinhaeng,” Rodong Sinmun, June 8th, 2020.)

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The wild fluctuations of North Korean exchange rates

Wednesday, May 20th, 2020

By: Benjamin Katzeff Silberstein

New market prices for North Korea came out recently, and lots is happening. Rice prices are down significantly, but compared to last year, the levels so far are quite normal. We should expect them to rise as the country goes further into the lean season between May and September (roughly). Foreign exchange rates, perhaps most interestingly, are fluctuating quite significantly, and the dollar especially so. The USD took a dive late last month, but it’s been fluctuating quite significantly before that as well, which would be more visible if not for the recent dive in the graph:

KPW-USD rates in three North Korean cities. Data source: Daily NK.

It seems that uncertainty itself is one of the main reasons. One in-country source told Daily NK:

“Even ordinary sellers who have long conducted relatively stable transactions in foreign currency are now afraid of losses because of dramatic fluctuations in the exchange rate,” the source told Daily NK. “Recently, the changes have been so frenzied that it’s not exaggerating to say that the prices in the afternoon will be different from the prices in the morning.”

“Wholesalers at the Pyongsong Market whose main patrons are other wholesalers throughout the country are complaining about the impact of the fluctuations in the exchange rate,” continued the source. “There are such major changes in the exchange rate between when wholesalers receive goods and then pass them along to retailers that uncertainty prevails.”

Citing exchange rate fluctuations of around KPW 1,000 in the past, some people reportedly do not believe that the fluctuations are a big deal. Yet, “most people think that we can’t sit idly by because the prices of imported goods are [also] increasing,” the source said.

“The damage done to businesses due to the exchange rate [fluctuations] and the increase in commodity prices are making things difficult for those who deal with transactions in foreign currency,” he added.

(Source: Kang Mi Jin, “Fluctuating exchange rates cause headaches for N. Korea’s business people,” Daily NK, 19/7/2020.)

It’s not just the government’s Covid19-measures themselves, such as the border closure, that impact the exchange rate. As noted on this website yesterday, the state is taking coercive actions of various forms to bring in funds, such as reportedly banning the use of foreign currency for domestic transactions in the hope that people will see no choice but to exchange their foreign money for domestic, bringing in much needed foreign exchange to the state.

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North Korea’s government bonds, and other economic coercion

Tuesday, May 19th, 2020

By: Benjamin Katzeff Silberstein 

For long, one of the main mysteries of the North Korean economy was how the government managed to keep the economy afloat despite what seemed, for a long time, like fairly stern sanctions implementation by China. North Korea’s market prices for both food and foreign currency remained largely stabile, while price for products such as gas perhaps at times were more volatile than normal, but still not at crisis levels. One of the most puzzling facts was that there were very few signs that state finances were hurting, although by all metrics, they should.

There are several reasons why they most likely did, quite severely, although it wouldn’t necessarily show up in market price data. Perhaps the state sector and marketized sectors are not as closely intertwined as many have thought, or perhaps the government was conducting stabilizing measures that somehow actually worked, either by coercion or market interventions.

The recent news that the government has issued bonds, however, is one of the more concrete signs of significant distress in North Korea’s state finances. In mid-April, Daily NK reported that the government would issue public bonds for the first time in 17 years, partially to finance construction of the Pyongyang General Hospital by ordering institutions involved in the project to pay subcontractors in bonds. A few days later, Daily NK confirmed that bonds had been issued, and that they would be used instead of cash to pay factories for materials necessary for state projects and the like. 40 percent of the bonds would be sold to individuals and 60 to enterprises. Sources that Daily NK spoke to were critical – unsurprisingly – and said that the measure was part of a general drive by the regime to soak up desperately needed cash, and not least foreign currency:

“The government failed to raise the funds it needed when it last floated bonds back in 2003,” another source in the country told Daily NK.

“The government is returning to this already failed way of doing things and only factories and business people will suffer,” he added.

Factories are being pressured to purchase the bonds and donju may face legal punishment or damage to their businesses if they fail to buy the bonds, Daily NK sources warned.

In response to the plan to float public bonds, high-level regime officials are reportedly starting to hoard US dollars. The Ministry of State Security (MSS), the country’s feared security agency, reportedly mobilized teams on Apr. 17 to crack down on those exchanging North Korean won for foreign currency.

“Money dealers have disappeared after it was made known that the MSS would arrest them for peddling dollars,” the first source told Daily NK.

“Donju in Pyongyang are desperate to buy up dollars but there’s nowhere to buy them,” he added.

(Source: “North Korea has begun issuing public bonds,” Daily NK, 22/4/2020.)

It might be worth pausing here to remember what bond are and why the North Korean government has (reportedly) issued them. Put simply, a bond is a loan that an investor – the entity that purchases the bond – gives to the issuer of the bond. Of course, it is very normal and common for governments to issue bonds. But in the case of North Korea, the problem is that investors have good reasons to have little faith that the state will actually be able to hold up its end of the bargain. In that case, the coercive bond sales essentially entail the state expropriating funds from individuals and institutions. The full details of the conditions of the bonds remain unclear, to the present author’s knowledge.

The danger is that when donju and other North Koreans with means don’t want to purchase bonds, the state may use force and coercion to make them do so even when they don’t see it as being in their economic interest. To many significant market actors, it’s likely already clear that those who refuse to purchase bonds or accept them as payment – if they even have that choice – may run into obstacles in running their businesses in the future. Judging by the reports so far, it seems that any organizations that require state funds to purchase raw materials or supplies now use bonds instead of cash, though it’s hard to imagine that this practice really extends to all such actions. In any case, for all the multitudes of ways in which the North Korean economy has changed over the past few years, the omnipotence and autonomy of the state, when it chooses to exercise it, remains.

When economic actors don’t want to purchase bonds voluntarily, coercion is another route to take. In a country such as North Korea, few economic actions are entirely non-political. Therefore, we should not be all that surprised that an owner of mine shafts near Pyongyang has reportedly been executed for his refusal to buy bonds. Part of the reason for the harsh punishment was his criticism of the state and the Party, but nonetheless, refusing to buy bonds was itself a political action:

The source told Daily NK that the sales department director had called the meeting to echo calls by the government to “spend their dollars and participate in the national public bond purchasing plan.” While the other mine shaft owners quietly listened, Lee reportedly asked the director what would happen if he chose to “not buy any public bonds.”

The sales department director responded that the act would be considered “reactionary” because it would mean refusal to carry out party policy.

Lee responded sarcastically, asking in what way the “state” and the “complex” had helped him build up his mining business. His response led to a war of words between the two men.

“The sales department director immediately reported the events of that day to the complex’s party committee. The committee convened a ‘security committee meeting’ [안전위원회] that ended up reporting Lee to the Ministry of State Security [MSS],” the source said.

Security committee meetings are convened at the provincial, municipal and county levels to discuss and make decisions on urgent matters. Participants typically include the chairman of the relevant party committee, the chairman and vice-chairman of the local people’s committee and management-level security officials.

The MSS did not immediately take action against Lee. It was not until May 6 that agents from the security agency visited the complex, forced all the complex’s workers to gather in the facility’s Laborer Hall, and then arrested Lee in front of them for “verbal reactionism” (말 반동). Lee was charged with “criticizing party policy” and he was immediately executed without trial or any other due process.

(Source: Ha Yoon Ah, “N. Korean businessman executed for refusing to buy gov’t bonds,” Daily NK, May 12th, 2020.)

The state is simultaneously using less coercive means to induce donju to invest in state enterprises. Nonetheless, the government is unlikely to raise the sorts of funds it hopes to through the bonds without serious means of coercion. It’s also not the only recent measure that suggests that the regime is quite seriously short on cash, and foreign currency in particular. Radio Free Asia reported on May 11th that the state has banned the use of foreign currency for most transactions, to force people to exchange their foreign currency for domestic at state institutions.

We don’t know the scale at which measures such as these are being implemented. They are unlikely to work in the longer run and may well be rolled back in time. But still, much damage may be done in the process.

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North Korean businessman executed for refusing to buy bonds

Tuesday, May 12th, 2020

Benjamin Katzeff Silberstein

A very disturbing report from Daily NK. Much of North Korea’s economic governance does still rest on sheer management by brute force and extortion:

The owner of mine shafts in a suburban area of Pyongyang who refused to buy government bonds was recently arrested and quietly executed, Daily NK has learned.

“The owner, a Mr. Lee, was arrested at the Laborer Hall in the Kangdong Area Coal-mining Complex on May 6 and executed soon after,” a source in North Korea told Daily NK on May 7.

DANGEROUS WORDS

In late April, Lee was called to a meeting with other mine shaft owners by the complex’s sales department director. Lee’s open refusal to purchase government bonds at this meeting was reportedly the reason why he was punished so harshly.

North Korea began requiring organizations requiring state funds to purchase raw materials or supplies in the country to use bonds instead of cash from Apr. 20.

The source told Daily NK that the sales department director had called the meeting to echo calls by the government to “spend their dollars and participate in the national public bond purchasing plan.” While the other mine shaft owners quietly listened, Lee reportedly asked the director what would happen if he chose to “not buy any public bonds.”

The sales department director responded that the act would be considered “reactionary” because it would mean refusal to carry out party policy.

Lee responded sarcastically, asking in what way the “state” and the “complex” had helped him build up his mining business. His response led to a war of words between the two men.

“The sales department director immediately reported the events of that day to the complex’s party committee. The committee convened a ‘security committee meeting’ [안전위원회] that ended up reporting Lee to the Ministry of State Security [MSS],” the source said.

Security committee meetings are convened at the provincial, municipal and county levels to discuss and make decisions on urgent matters. Participants typically include the chairman of the relevant party committee, the chairman and vice-chairman of the local people’s committee and management-level security officials.

The MSS did not immediately take action against Lee. It was not until May 6 that agents from the security agency visited the complex, forced all the complex’s workers to gather in the facility’s Laborer Hall, and then arrested Lee in front of them for “verbal reactionism” (말 반동). Lee was charged with “criticizing party policy” and he was immediately executed without trial or any other due process.

SEVERE PUNISHMENT

It is rare in North Korea for such a punishment to be meted out so quickly – and on the same day – as an arrest. North Korean authorities may have aimed to make Lee an example of what happens when business people refuse to take part in party policy.

“[Other] mine shaft owners appear to be accepting the [government’s] plans to have enterprises buy up public bonds, but they are complaining about it nonetheless,” the source said.

The state reportedly seized Lee’s mine shafts along with large cargo trucks Lee purchased with his own money. North Korean authorities also raided Lee’s home and seized his possessions while his wife and two children were sent to a prison camp.

(Source: Ha Yoon Ah, “N. Korean businessman executed for refusing to buy gov’t bonds,” Daily NK, 12/5/2020.)

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