Archive for the ‘Agriculture’ Category

Nobody knows how much food the DPRK needs–especially them.

Friday, May 16th, 2008

According to the Choson Ilbo:  

While the World Food Program says the North is facing a food crisis, exact statistics appear to be tough to gauge. Returning from food aid talks in the U.S., a ranking Seoul diplomat told reporters, “The U.S. also seems to be experiencing difficulties figuring out the exact food condition in North Korea, as it has to rely on remarks by North Korean officials [but] the North appears to have become more flexible on monitoring issues in the last couple of months.”

In all honesty, North Korean officials probably have no idea how much food their country needs either. Why? 

1.  North Korea’s statistical apparatus broke down a long time ago.  Production records are still kept on-site in paper notebooks. There is no comunications or computing technology to measure actual production. Throw in a few fires, floods, etc. and you are running blind.  But even if such technology existed, collective farmers, as with most factory workers in socialist systems, routinely inflate their production numbers, and the regime’s ability to detect and punish this kind of behavior is very weak–and they know it.

2. There is no commodities market in the DPRK to tell officials how much food is being produced privately.  Additionally, the paucity of communications and transportation infrastructure, combined with severe barriers to entrepreneurship, prevents North Korea’s agricultural markets from becomming as integrated as they could be.  Higher price volatility and short term scarcity are the results.  Rumors can send prices through the roof because nothing can be confirmed.

3. There has been no audit of the DPRK’s population since before the last famine, so we don’t even know how many of them there are or where they live.

In all honesty, I think we (the international community) can do a better job of determining how much food they need than they can.  Here is a great place to start.

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US to offer DPRK food aid. Seoul still waiting to be asked.

Tuesday, May 13th, 2008

According to the Financial Times (h/t One Free Korea):

The US has agreed to give North Korea 500,000 tonnes of food aid under a new deal that would allow monitors unprecedented access to oversee distribution in the Stalinist state.

Washington will supply 400,000 tonnes via the United Nation’s World Food Programme, while US non-governmental organisations will distribute another 100,000 tonnes, according to people familiar with the agreement. One US official told the Financial Times that President George W. Bush would approve the deal “within days”.

In order to ensure the food reaches ordinary North Koreans, Pyongyang has agreed to extensive monitoring, including random inspections that several observers said were “unprecedented”. It would also allow “port to mouth” inspections to reduce concerns that food would be siphoned off for the elites that support Kim Jong-il, the North Korean leader.

Pyongyang will also allow more monitors into North Korea than under previous food programmes, and will allow them to visit a greater number of areas.

North Korea will receive an initial shipment of 50,000 tonnes in early June. Once Mr Bush formally approves the deal, US experts will meet counterparts from North Korea, the WFP and NGOs to decide what kind of food is needed.

…And contrary to its previous report on 5/11/08 that South Korea was preparing to donate a nearly USD$10 million aid package to the DPRK, despite never being formally asked for it, Yohnap today reports that Seoul is doing no such thing.  The trial balloon carrying the aid must have popped somewhere over the DMZ.

Read the full stories here:
US to send food to N Korea under new deal
Financial Times
Demetri Sevastopulo
5/13/2008

Seoul set to approve 10 bln won in aid for N. Korea: official
Yonhap 
5/11/2008

Gov’t denies rice aid to be sent to N. Korea via int’l body
Yonhap
Shim Sun-ah
5/13/2008

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Food shortage coping strategies

Saturday, May 10th, 2008

With the likelihood that food is coming into short supply in North Korea, the authorities and individuals alike have implemented strategies to minimize the adverse effects.

I am keeping a running list of official and civil responses here as they appear in the media.

1. The DPRK supposedly ended rations for mid-level cadres (party and state employees), though food can still be purchased in markets. Unless the government is hoarding its grain supplies, this probably has the effect of improving food distribution (transferring food stocks outside Pyongyang), though not to the satisfaction of those who were used to receiving it for “free.”

2. The DPRK asked China for food aid. (Requested 150,000: tons of corn. Received: 50,000 tons on their first ask)

3. Propaganda extolling people not to waste food has been distributed to workers.

4. The DPRK has started cracking down on liquor production/sale.

5. Lets grow potatoes!

6. Distributing food stocks to military families from military warehouses.  This will hopefully take some of the pressure off the price of grains in the markets.

7. Solicit food aid from the US.

8. Officials begin to demand more bribes!

9.  The KPA halts military exercises to assist in farming.

10.  Propaganda campaign to educate the population about alternative foods (Good Friends via OneFreeKorea)

11. China increases food export quota

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North Korea stoic in the face of famine

Sunday, May 4th, 2008

Andrei Lankov is the first in the media to construct a narrative which details the series of decisions that have led to North Korea’s current food crunch.

From his article:

Merely a year ago, North Korean leaders were optimistic. The good harvest of 2005 persuaded them that food shortages were behind them, and that North Korean agriculture had begun to recover. The 2005 harvest was merely 4.6 million tons, well below the 5.2 million tons which are necessary to keep the entire population alive. Still, it was clearly an improvement.

Lankov’s assertion that 5.2 million tons of grain are needed to sustain the DPRK population comes from the UN.  Recent work by Marcus Noland estimates that this number is closer to 4.6, although exact figuress are not possible because the actual size of the DPRK population is unknown.

In addition, for a decade South Korean administrations have maintained their Sunshine policy of unilateral concessions and unconditional food aid. Since 2000, about 450,000 tonnes of food have bee delivered to North Korean granaries from the South every year, free of charge. Its distribution was almost unmonitored. Pyongyang leaders came to believe that such aid would continue for the foreseeable future. Additionally, increasing Chinese involvement with North Korea, while not necessarily welcomed by Pyongyang, was seen as a sign that additional food would be coming – and Chinese shipments were roughly equal to those of South Korea. Finally, the basic agreement with the US on the nuclear issue was perceived in Pyongyang as a sign of Washington’s willingness to pay generously for rather minor concessions.

As noted by many besides Lankov (here), this good fortune prompted the DPRK government to reimpose elements of the planned economy which failed long ago: 

In 2005, authorities claimed that the public distribution system would be completely revived, and banned private trade in grain. This ban was generally ignored and eventually failed, but subsequent moves were more successful. In late 2006, authorities banned male vendors from the country’s marketplaces. In 2007, women under 50 years old were also prohibited from engaging in business in markets. The assumption is that every able-bodied North Korean should go where he or she belongs, specifically to the state-run factories of the Stalinist economy.

The government also staged some campaigns against semi-legal private businesses that had been tacitly tolerated since the late 1990s. After 2005, authorities successfully cracked down on the trafficking, smuggling and illegal labor migration occurring on the border with China. There was also a remarkable increase in the volume of anti-market rhetoric in the official Pyongyang propaganda.

The economic problems they were attempting to achieve at home through these policies, however, were only the first of several shocks to hit the DPRK economy in the last year: 

1. Low harvest numbers

First of all, the 2007 harvest was a failure. It was estimated at only 3.8 million tons, well short of the critical 5.2 million ton benchmark [and Noland’s 4.6 benchmark]. As usual, floods were officially blamed (as if the impoverished North does not share the same small peninsula with the prosperous South, where no signs of food shortage have been seen in decades).

2. Drop in aid from South Korea

The presidential elections of December 2007 led to a change of leadership in Seoul. The new government, led by right-of-the-center pragmatist Lee Myong-bak, said that the era of unconditional concessions to the North was over.

3. International food prices rising

The situation was aggravated by the explosive rise of international food prices. The North Korean press has reported the trend widely obviously in an attempt to,place the blame for the current crisis on factors clearly beyond the government’s control. On April 20, Nodong Sinmun, the major official daily newspaper, ran an article that described food supply difficulties worldwide and mentioned a dramatic increase on food custom duties in “certain countries”.

4. Cold shoulder from China

The worldwide price hike means that the amount of food coming to North Korea via foreign aid channels is likely to decrease. China, preoccupied with the Summer Olympic Games in August, and increasingly annoyed by North Korean antics, is not too willing to help the North out of its trouble which, as some people in Beijing believe, were brought on Pyongyang by its own stubborn resistance to the Chinese reform model.

So what is Lankov’s prediction?

In North Korea, the domestic food situation is deteriorating fast. The sudden hike in food prices seems to be a sign of deepening crisis. There were reports about farmers who refuse to toil the state-owned fields, stating that they are too weak to work (but still willing to work on their private plots). There are rumors of villagers starving to death even though observers believe the food shortage has not yet developed into a famine. If the shortage of fertilizer damages this year’s harvest, a famine may develop by the end of this year.

The political consequences are unclear. Knowledge about the situation inside North Korea remains grossly inadequate. If the past is an indication, however, nothing of great political significance will happen if a few thousand fresh graves appear in the hills of North Hamgyong province. In all probability, Kim Jong-il’s government will use its time-tested tactics: the political elite and the best units of the army will receive full rations; the residents of major cities, police and common soldiers will get barely enough to survive; and the “politically unreliable”, largely villagers from the remote northwest, will be left to their sorry fate.

There is hope the government will momentarily halt its counter-offensive against free market economics, and will ease its border controls to allow more people to China – but even such moderate measures are unlikely. Isolated revolts are possible, but the government seems to be supremely confident. After all, the disorganized, isolated population, deprived of any opportunities to organize or even communicate between themselves, is not capable of challenging the system.

Read the full story here:
North Korea stoic in the face of famine
Asia Times
Andrei Lankov
4/30/2008

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Muted birthday celebration

Tuesday, April 15th, 2008

Rumors of food shortages in North Korea seem to be popping up everywhere (even on this website), so now any change in Pyongyang’s standard operating procedure is interpreted in the media as a direct result of this condition.  Changes in regime behavior might be related to food shortages, but then again, we are talking about the DPRK, and we don’t really know how or why many decisions are made.

The latest North Korean “Kremlinology” comes from Yonhap:

With neither foreign artists singing in praise of Kim, who is dubbed the “Sun of mankind” by the communist state, nor the standard massive gymnastic display performed by about 100,000 people on show, North Koreans started the two-day holiday in a low-key manner.

The North traditionally spends a lot on celebrating one of the nation’s biggest holidays on a grand scale, inviting many foreign musicians and art groups to perform in the “April Friendship Art Festival” that marks the birthday of the nation’s founder and unveiling large public monuments.

Pyongyang, however, has scaled down the previously annual event to a biennual in what analysts said is a measure to save badly needed foreign currency because of worsening hardships facing the country.

and as for Arirang…

The Koryo Tours website claims that Arirang will take place from August to the end of September.  This could change, but it is 2-4 weeks shorter than the last couple of years (although those were interrupted by floods!).

Read the full story here:
N. Korea marks late leader’s birthday amid economic hardship
Yonhap
Shim Sun-ah
4/15/2008

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Good Friends publishes price data

Tuesday, April 15th, 2008

North Korea Today No. 119 Apr 2008
End of March, Price of Rice and Maize Reaches Highest Level in History

prices.JPG

(click on image for more legible version)

The price of foodstuffs is increasing at an incredible pace. On March 30th, for the first time in the country, the price of rice went over the 2,000won per kilogram mark and was traded for 2,050won in the city of Nampo. In the case of maize, the situation is even more extreme. The rumors that the price of maize would go over 1,000won in April became a reality and was being sold for 1,000won in places like Pyongyang, Chungjin, and Hamheung, while in Nampo, it was being traded for 1,050won. In other outlying regions, maize was still being traded at high prices ranging from 900won-950won. Only in areas like Onsung, Hoeryung, and some border areas in North Hamgyong Province was rice being traded at the comparatively low price of 1,600won for rice and 650-750won for maize.

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When food and politics collide

Sunday, April 13th, 2008

News of the DPRK’s food shortages began to surface several weeks ago when Good Friends reported:

North Korea’s chronic food shortage has worsened to affect even some of the country’s elite citizens in the capital, a South Korean aid group said Thursday.

The communist nation has not given rice rations to medium- and lower-level officials living in Pyongyang this month after cutting the rations by 60 percent in February, the Good Friends aid agency said in its regular newsletter.

Pyongyang citizens are considered the most well-off in the isolated, impoverished country, where the government controls most means of production and operates a centralized ration system. Only those deemed most loyal to Kim Jong Il’s regime are allowed to live in the capital.

The food situation is more serious in rural areas, with residents in many regions in the country’s South Hwanghae province living without food rations since November, the aid group said. (AP)

Why was this the case?

Floods last August ruined part of the main yearly harvest, creating a 25 percent shortfall in the food supply and putting 6 million people in need, according to the U.N. World Food Program.

Over the winter, drought damaged the wheat and barley crop, according to a recent report in the official North Korean media. That crop normally tides people over during the summer “lean season” until the fall harvest.

North Korea’s ability to buy food, meanwhile, has plunged, as the cost of rice and wheat on the global market has jumped to record highs, up 50 percent in the past six months.

China also appears to have tightened its food squeeze on North Korea for domestic reasons. In order to meet local demand and control inflation, Beijing slapped a 22 percent tariff on grain exports to the North. (Washington Post)

So North Korea’s domestic agricultural production has fallen and so have commercial food imports (international inflation, OECD government subsidies for bio-fuels, and increasing fuel prices have combined to raise the prices of commodities such as rice and pork up to 70% in the course of a year). 

Compounding this problem, however, agricultural aid from North Korea’s two most reliable benefactors (China and South Korea) has dried up.

[China] has quietly slashed food aid to North Korea, according to figures compiled by the World Food Program. Deliveries plummeted from 440,000 metric tons in 2005 to 207,000 tons in 2006. Last year there was a slight increase in aid, but it remained far below the levels of the past decade. (Washington Post)

And strained relations with the new Lee government in South Korea have not helped:

The South typically sends about 500,000 tonnes of rice and 300,000 tonnes of fertiliser a year. None has been sent this year and without the fertiliser, North Korea is almost certain to see a fall of several tens of tonnes in its harvest (Reuters)

So what will be the mitigating factors that prevent another humanitarian emergency?

“The reason for the mass starvation that occurred in late 90s is that North Korea faced natural disasters without expanding the market’s capability to substitute for the broken planned economy capability, and so the damage to North Korean citizens was inevitably large.”

“The market in North Korea has expanded in the last 10 years. The supply and demand structure of daily necessities, including food items, has been formed.”

“Because the market capacity has expanded, the possibility of a mass-scale starvation occurring is no longer high. In actuality, the change in food prices is being monitored at the market.”

-Dong Yong Seung, the Samsung Economic Research Institute’s Economic Security Team Chief, speaking at the 19th Expert Forum sponsored by the Peace Foundation (Daily NK)

Mr. Dong’s analysis addresses the improved efficiency of DRPK’s market supply chains but does not address the effects of an adverse supply shock. 

The UN seems ready to help, although it has not been asked:

Institutionally, mechanisms are in place in North Korea to ring the international alarm bell before hunger turns into mass starvation. The World Food Program monitors nutrition in 50 counties, and the Kim government has become expert in asking for help.

“The North Koreans know that they are facing a difficult situation and have made it increasingly clear in the past few weeks that they will need outside assistance to meet their growing needs,” the U.N. official said, asking not to be identified because of the sensitivity of the issue.

North Korea, which even with a good harvest still falls about 1 million tonnes, or around 20 percent, short of what it needs to feed its people, relies heavily on aid from China, South Korea and U.N. aid agencies to fill the gap.

The UN official said it was clear from a variety of sources that the food security situation was worsening in North Korea and that it needed to be addressed.

Last month Kwon Tae-jin, an expert on the North’s agriculture sector at the South’s Korea Rural Economic Institute told Reuters that if South Korea and other nations did not send food aid, the North would be faced with a food crisis worse than the one in the 90s.

The U.N. Food and Agriculture Organisation said in late March it sees the North having a shortfall of about 1.66 million tonnes in cereals for the year ending in October 2008.

The North will start to feel the shortage the hardest in the coming months when its meagre stocks of food, already depleted by flooding that hit the country last year, dry up and before the start of its potato harvest in June and July. (Washington Post)

The UNWFP, however, will be under pressure from its donors to monitor food aid and make sure it is not diverted to non-emergency uses.  Under these conditions, it is not likely that they will be asked to provide much aid until a catastrophy is already underway.  So with the UN out of the picture, who is best positioned to prevent the reemergence of a humanitarian crisis in North Korea today? China.  

Despite China’s own food probelms, however, it is always likely to capitulate, at least in part, to North Korea’s emergency requests.  China does not want to deal with another North Korean famine, particularly during the Olympic season, and they certainly do not want to deal with any political instability that could result. 

Yonhap reports that the DPRK has asked the Chinese for 150,000 tons of corn this year.  Chinas says they will give 50,000 tons–and that is just initially. (Yonhap)

UPDATE 4/14/2008: I still have not seen any reports in the media of Noth Korea seeking suport from Russia.

UPDATE 6/9/2008: China increases grain export quota to North Korea to 150,000 tons

(more…)

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World oil and grain prices up, DPRK feels the pinch

Thursday, March 13th, 2008

Institute for Far Eastern Studies (IFES)
NK Bfrief No. 08-3-13-1
3/13/2008

International fuel and food prices are skyrocketing, while the cost of Chinese goods continues to rise, so that this so-called ‘triple-threat’ is sending shockwaves through the North Korean economy. In this year’s New Year’s Joint Editorial, North Korea championed the banner of a ‘strong and prosperous nation’, and declared that this year would focus on the economy, however this ‘triple-threat’ will likely make it extremely difficult for the North to meet its policy goals.

With oil prices peaking at over 110 USD per barrel, if these high oil prices continue, North Korea, which imports crude and refined oil from China, Russia and other countries, will face a growing import burden. In accordance with the February 13th agreement reached through six-party talks, South Korea, the United States and others will provide some heavy fuel oil, and the agreement stipulated the amount of oil to be delivered, rather than the value, so this will not be affected by rising prices. However, this oil does not cover all of the North’s needs, and as for the remaining portion, either the amount imported will have to be reduced, or the North will have no choice but to invest considerably more in fuel. In addition, as a large portion of North Korea’s oil is imported from China, Pyongyang’s trade deficit with its neighbor will also grow.

According to the Korea Trade Investment Promotion Agency (KOTRA), North Korea imported 523,000 tons of crude oil from China in 2005, 524,000 tons in 2006, and 523,000 tons last year, each year accounting for approximately 25 percent of total oil imports. North Korea’s trade deficit with China has shown a steadily growing trend, reaching 212,330,000 USD in 2004, 588,210,000 USD in 2005, and 764,170,000 USD in 2006. With grain prices also skyrocketing, and North Korea depending largely on China and Thailand for rice and other grain imports, the burden on the North’s economy is growing, and this is one factor in the instability of domestic prices in the DPRK.

According to the Chinese Customs Bureau, North Korea imported 81,041 tons of rice and 53,888 tons of corn last year, increases of 109.9 percent and 37.4 percent, respectively. North Korea’s corn, rice and oil imports from China are subject to market price controls, so that rising international prices directly affect the North’s cost burden. Last year, the price of Chinese goods rose 4.8 percent, recording the largest jump in ten years, and this trend extends to a wide variety of goods. 80 percent of disposable goods in North Korea are produced in China, and rising Chinese prices are directly reflected in North Korean import costs, which is passed on to DPRK citizens.

As North Korea emphasizes the building of its economy, it appears unlikely that residents will feel any direct effects of Pyongyang’s promise to prioritize the stability of its citizens’ livelihoods.

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North Korea can produce instant noodles again

Tuesday, February 12th, 2008

The Chosun-Shinbo reports (via the Daily NK) “North Korea can produce instant noodles again” because construction has been completed on Pyongyang’s newest (and largest) noodle factory, the Pyongyang Wheat Flour Factory.

“Starting this year, domestically produced instant noodles will likely be supplied to people on a large scale.”(Daily NK)

…signaling that the DPRK government still seems intent on re-launcing the collapsed Public Distribution System (which has floundered many times).

[The] Pyongyang Wheat Flour Factory is located in Samheong-dong of Mankyungdae District, in Pyongyang, and mainly produces wheat flour, cookie, noodle, and yeast. North Korea built its first noodle factory, Daedong River Instant Noodle Factory, with foreign capital in August 2000 along the Daedong River in Pyongyang.(Daily NK)

Last October Yonhap, reported that Hyundai’s 44,000-strong union donated US$553,800,  appx. $13 per worker, to help finance a corn noodle factory in Pyongyang.  This is likely the “older” Daedong River Instant Noodle Factory.  If this is the case, then Pyongyang has two noodle factories coming on line at about the same time.

The rest of the story:
Although the DPRK government is a newcomer to the noodle business, noodle production and consumption have been burgeoning in North Korea’s private economy, and there is supportive journalistic evidence that the business now suports those on the lower rungs of the  economic ladder (see here, here, here, and here).  Small scale noodle production requires little capital, so it is a natural fit for those who have nothing but have taken to supporting themselves. 

The opening of new government-operated food processing plants is tantamount to a “re-nationalization” of a “privatized” industry in the DPRK.  Past reports claim that noodle sales earned private vendors between 900 to 1,600 won.  Now these vendors, who operate at the fringes of North Korea’s semi-legal private economy, will at a minimum, be forced to compete with “free” or heavily subsidized government operators. 

What will be the result?  On the pessimistic side, we could claim that the DPRK government is attempting to monopolize the food supply to control the population (as it has in the past).  On the other hand, their ambitions might be more modest and they are only looking to establish some form of carrot they can point to as legitimization of the government’s leadership.

From an economic reform perspective, however, North Korea needs fewer government-run noodle factories and a better business environment for noodle entrepreneurs. 

The full stories can be found here:
North Korea Can Produce Instant Noodles Again
Daily NK
Park Hyun Min
2/12/2008

Hyundai Motor union leaders visit N. Korea for noodle project
Yonhap
10/31/2007

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DPRK economic statistics from KEI (BoK data)

Saturday, February 2nd, 2008

In October, the Korea Economic Institute published a presentation of North Korean economic data assembled by the Bank of Korea.  Basic stats below:

  • GDP: -1.1% in 2006 (+3.8% in 2005)-Due to decrease in agriculture output. 
  • Services are the largest component of the economy (34%)
  • Trade volume (exports + imports) approximately US$3 billion
  • 2005 trading partners in order: China, South Korea, Thailand, Russia, Japan, Singapore

See the full report here: northkorea.ppt

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