Archive for the ‘Statistics’ Category

Asahi Shimbun: China provided North Korea with substantial amounts of food and fertilizer this year

Wednesday, November 4th, 2020

Benjamin Katzeff Silberstein

In a piece of news that should surprise no one, Asahi Shimbun reports that South Korean government sources say China provided North Korea with 5-600,000 tons of food aid and fertilizer this year. Although it wouldn’t entirely make up for the estimated shortfall, it is still a highly significant contribution:

But several South Korean government sources said China has provided North Korea with between 500,000 and 600,000 tons of food along with the fertilizer this year.

It also sent about 600,000 tons of corn and other types of grain between June and August, according to Chinese sources with inside knowledge of ties with North Korea.

Pyongyang requested more assistance in the aftermath of the summer typhoon damage and Beijing is considering sending an additional 200,000 tons of food, the sources said.

The South Korean sources focused on the volume of fertilizer shipped to North Korea as such assistance is considered highly unusual.

North Korean authorities equate one ton of fertilizer to 10 tons of food assistance, a former high-ranking North Korean government official said.

“Due to chronic shortages, fertilizer is highly prized in North Korea,” the official added. “The amount sent this year is equivalent to 5.5 million tons of food, which exceeds the yearly production of food. It was a very unusual level of assistance.”

Although North Korea is no longer in the grips of famine that raged in the late 1990s and claimed countless lives, the U.N. World Food Program has estimated that between 2018 and 2019 about 10 million North Koreans did not have enough to eat.

The situation is believed to be worse this year.

North Korea was plagued by flooding and other damage due to typhoons and torrential rain in summer after near-drought conditions in spring.

A source at a Chinese government-affiliated agency who is well-versed in issues involving North Korean agriculture said that the harvest estimate at planting time was between 3.5 million and 3.8 million tons for a shortfall of about 1.5 million tons.

Rice prices were kept stable through the release of grain stockpiled for emergencies, but the situation without China’s assistance was expected to be dire from next spring.

China’s decision to bail out its unpredictable neighbor may reflect a strategy to keep North Korea in its corner as Beijing’s confrontation with Washington worsens. In this regard, Beijing made a big fuss of its involvement in joining fighting in the Korean War on the 70th anniversary of China’s participation.

“China and North Korea have always shared interests in terms of their view of the United States, but that has strengthened recently,” said a North Korean source. “China is sending a message to the United States through its appeal of a honeymoon period with North Korea.”

With no signs of progress in denuclearization talks with the United States, the easing of economic sanctions against North Korea appears unlikely in the short term.

That suggests North Korea will continue to lean on China for support, analysts said.

“If North Korea receives support from abroad, it will no longer be able to say it is getting by with its own efforts,” said a South Korean expert on the North Korean economy. “But North Korea can continue to save face because China does not announce the assistance levels.”

(Article source: Takeshi Kamiya in Seoul and Yoshikazu Hirai in Shenyang, “China bailout to North Korea: massive food and fertilizer aid,” Asahi Shimbun, November 3rd, 2020.)

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September, 2020: the Latest UN Panel of Experts Report and the North Korean Economy

Tuesday, September 29th, 2020

By: Benjamin Katzeff Silberstein

The latest UN Panel of Experts Report is out. Some points relating to the overall state of the North Korean economy, after a quick read:

  • Ship-to-ship-transfers of fuel (“refined petroleum products”) continue. This is nothing new. Only between January and May 2020, North Korea is estimated to have broken the sanctions-mandated ceiling of 500,000 barrels per year. As I have argued elsewhere, many times, even with STS transfers and other illicit methods to flout sanctions, they are taking a toll on the North Korean economy since they are expensive. North Korea has to compensate sellers for the added risk of smuggling somehow. So sanctions, in this sense, are certainly not without impact.
  • Coal deliveries are also happening via STS and other transportation means. Again, this is not new, and rather, is part of the steady state for North Korea under sanctions. As with oil and fuel products, North Korea must be taking a financial hit to compensate buyers for the added risk of violating sanctions. The report says that coal exports resumed, after a Covid-19-pause, in March of this year.
  • The report does note that illicit tanker deliveries decreased thus far in 2020 as compared to 2019. Whether that means that less fuel was actually supplied is unclear. Indeed, according to the report, the delivery tankers had higher capacity than in the past.
  • Overall, it seems that judging from the PoE estimates, North Korea may not be suffering from fuel shortages at all, on the whole. Of course, we know next to nothing about how the illegally imported fuel is used and distributed within the country. Fuel prices have, however, not really been outside the span of the generally normal (or at times even lower), suggesting that the amounts coming in are roughly similar to normal times.

One quick reflection on the exports issue, particularly of coal and other sanctioned export goods: it’s clear that coal trade is happening, seemingly relatively undisturbed, on a scale that is troubling from a sanctions-implementation perspective. What’s tricky, though, is that we know fairly little about proportions. How much coal is North Korea actually able to sell, and to what prices?

As of now, all we know is that coal is being exported on a substantial scale. From an analytical perspective, that leaves a lot to be desired.

However, it is crucial to note the myriads of ways in which the government is able to at least partially compensate for the loss in export income stemming from sanctions. The report details several of these, including a wide range of cyber crime.

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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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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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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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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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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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The UNCTAD claim on North Korea’s GDP-growth in 2019

Saturday, January 18th, 2020

By: Benjamin Katzeff Silberstein

The United Nations Conference on Trade and Development (UNCTAD) estimates that North Korea saw a real-GDP growth of 1.8 percent in 2019. Marcus Noland once wrote that one should not “[…] trust any datum on North Korea that comes with a decimal point attached.” This is perhaps even more true of large-scale, macro figures such as this. For one, you need an estimated inflation rate to calculate real GDP, and I have no idea which number UNCTAD may be using. You can find the figure on p. 178 here, together with a quite optimistic prognosis for 2020 and 2021. Even with that growth, North Korea barely recaps the negative growth of 2018. Let me say again that all of these numbers build on little but more or less qualified guesswork. That’s important to keep in mind since this one line in a UN report graph has made quite a few international headlines already.

Most likely, UNCTAD builds their projections upon the somewhat lower decline in exports in 2019 compared with 2018. It’d be interesting to know if they also take into account the seemingly decreased vigilance in sanctions enforcement by China, and how one could possibly quantify this. More on the possible variables here.

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