Archive for the ‘Uncategorized’ Category

North Korea’s problematic Covid-19 numbers

Wednesday, May 18th, 2022

By: Benjamin Katzeff Silberstein

North Korea’s admission of a Covid-19 outbreak has understandably drawn global attention. It’s one of two countries – the other one being Eritrea – that have not yet started administering Covid-19 vaccines. North Korea also claimed, until just a few days ago, to have had zero cases of infections.

Naturally, the government’s data is highly interesting in this situation, and you can follow the officially reported numbers here at 38 North‘s tracker. Due to the lack of testing kits, North Korean authorities report cases of “fever” as a proxy for Covid-19.

These numbers perhaps tell us more about how the government perceives the situation, than how many North Koreans have actually been infected with Covid-19. That North Korean authorities are now signalling a greater level of pragmatism in tackling the virus does not mean their claims until a few days ago about zero cases were true. The zero cases claim defies common sense and logic, not least since North Korea borders Chinese provinces where we know there have been significant outbreaks. Outlets such as Daily NK, Rimjingang, Radio Free Asia and others with sources inside North Korea have reported since the start of the pandemic about large numbers of people coming down with Covid-19 symptoms.

Already in March 2020, shortly after the pandemic began, sources in North Korea told Daily NK that over 20 North Koreans had died from the virus. By November last year, Daily NK reported that more than 100,000 people with symptoms were housed in government quarantine facilities. These are only two examples out of a large number of such reports. There is of course no way to confirm any of the information about Covid outbreaks in North Korea. Most  reports, however, have used roughly the same metric as the government uses right now to count cases — fever symptoms.

North Korean state media reports of the number of people in treatment per province also raises a lot of questions. Consider the map below, from the 38 North tracker:

It is possible that Pyongyang and its surroundings, Kaesong, and Rason, all have significantly higher numbers of cases than, say, North Hamgyong province. After all, Pyongyang is a relatively crowded city by North Korean standards, making infections spread more easily. But these are also sensitive areas and it may well be that the government is simply paying more attention by testing (for fever) more and monitoring numbers more closely. All three, in fact, are so-called “administrative special cities” (특별시/t’ŭkpyŏlssi), placing them under more direct central government administration than other cities. Pyongyang, moreover, is politically sensitive as the country’s power center, and Kaesong sits on the tense border with South Korea. Rason holds a special economic zone and is close to North Korea’s borders with Russia and China. Perhaps the government pays greater attention to these cities because of this common denominator.

The question is still why the North Korean government chose to acknowledge the presence of Covid-19 in the country this month. Since the announcement, the state has strengthened quarantine measures, some of which were already in place, and imposed a nationwide lockdown, though there’s been some questions raised about how sternly it is implemented. It is still possible, as I noted in a previous post, that the government is changing to a more pragmatic Covid-19 policy overall, starting with recognizing the virus.

As of now few data points point in this direction, although it is still much too early to tell. It may also be that the government made the announcement to set the stage for accepting vaccines and other assistance from abroad. Even with such assistance, it remains unclear how the rollout would work in practice given North Korea’s lacking equipment for, for example, storing vaccines and keeping them cold while transported around the country.

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A blast from the past: Yoon’s outdated North Korea thinking

Tuesday, May 10th, 2022

By: Benjamin Katzeff Silberstein

South Korea’s new president Yoon Suk-yeol took the oath of office in Seoul earlier today. North Korea was hardly the main focus of his speech, but no South Korean president could avoid the topic, especially three days after a North Korean short-range ballistic missile launch. His idea for inducing denuclearization in North Korea appears very similar to former US president Donald Trump’s, namely to give North Korea lots of shiny, expensive things:

“북한이 핵 개발을 중단하고 실질적인 비핵화로 전환한다면 국제사회와 협력하여 북한 경제와 북한 주민의 삶을 획기적으로 개선할 수 있는 담대한 계획을 준비하겠습니다.”

(Source: Ji Song-rim, “취임 일성으로 ‘북한 비핵화’ 강조…경제적 보상 제안,” Yonhap News, May 10th, 2022.)

“While North Korea’s nuclear weapon programs are a threat not only to our security and that of Northeast Asia, the door to dialogue will remain open so that we can peacefully resolve this threat…If North Korea genuinely embarks on a process to complete denuclearization, we are prepared to work with the international community to present an audacious plan that will vastly strengthen North Korea’s economy and improve the quality of life for its people.”

(Source: Lee Haye-ah, “Yoon champions freedom, offers to revive N.K. economy with ‘audacious plan,'” Yonhap News, May 10th, 2022.)

Of course, it’s still unclear exactly what this “audacious plan (담대한 계획)” is. But in context, an “audacious plan that will vastly strengthen North Korea’s economy” most likely entails South Korea and possibly others offering North Korea a shiny, brand new infrastructure for basically the entire country, investments, vast sums of aid, et cetera, in exchange for North Korea giving up  its nuclear weapons. Essentially what Trump suggested in 2019. I’m obviously simplifying here, but those may well be the broad strokes.

This line of thinking — assuming it’s genuine and not just a way to avoid the topic —  relies on inaccurate and, at best, outdated, ideas about North Korean economic policy. If handing over piles of cash was the solution, there wouldn’t still be a North Korean nuclear issue. Lee Myung-bak, for example, made similar suggestions through his “Denuclearization Development 3000 (비핵 개방 3000)” But North Korea has continuously reneged on deals in this spirit, or simply rejected, often in plain language, that they would ever trade the nuclear weapons for economic incentives.

North Korea has, moreover, declared the old model of special economic zones built and run by South Korea dead and gone. Kim Jong-un wants foreign investment, but he doesn’t want companies from the “southern puppet regime” dictating any of the conditions or managing special economic zones on his territory.

It seems likely to me that Yoon is aware of all of this – he presumably gets high-quality briefings on North Korean policies – but that this was the least bad thing to say, since he had to say something about his vision for North Korea policy. Subin Kim, who analyzes South Korean politics at his excellent website Koreakontext, pointed out in an email that most of Yoon’s national security team consist of the same people who advised Lee Myung-bak on North Korea policy. Perhaps this is simply a way of avoiding the topic by repeating tired and tried phrases. In any case, such suggestions are a dead end with North Korea, and Yoon likely knows it.

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Squaring the conflicting news reports on North Korea’s border reopening

Thursday, November 4th, 2021

By: Benjamin Katzeff Silberstein

Over the past few days, there’s been a flurry of news reports suggesting two seemingly conflicting things: 1) that North Korea may reopen its borders with China and Russia already in November and, 2) that the border closure may remain in effect for several years to come.

First, Yonhap:

North Korea is in the final stage of preparations to reopen its train routes with China following prolonged border controls to stave off the coronavirus, a unification ministry official said Thursday.

The North is expected to first resume cargo transportation via land routes, the official said, though adding it’s hard to tell exactly when the operations would begin.

“Our assessment is that various preparations for the resumption of goods exchange through train routes are at the final stage,” the official told reporters on background.

Seoul officials have said signs indicating preparations for trade resumption were detected in the North Korean regions bordering China, such as the construction of quarantine facilities.

Last week, the National Intelligence Service (NIS) told lawmakers the North is in talks with China and Russia to resume train operations across the border and those connecting Sinuiju and Dandong — border cities of the North and China, respectively — could resume as early as November.

(Source: “N. Korea in final preparations to reopen border with China: official,” Yonhap News, 4/11/2021.)

In addition, NK News have reported several times over the past few months on satellite imagery showing construction of quarantine facilities near the border with China as well as activity near border crossings suggesting that trade might soon resume.

At the same time, according to media outlets with grassroots sources in North Korea, the authorities have told the population to buckle down and prepare for hard times to continue, as the border lockdown won’t ease even partially this year. Daily NK:

In particular, the provincial party said the border closure was not just a measure to protect the people from COVID-19, but also to awaken government organizations, enterprises and people “full of illusions about imported goods” from their delusions. They stressed the need to satisfy the people’s demand for consumer goods with “products produced in our country (North Korea).”

The source added that the party said the goal of the light industry and commercial sectors was to produce “uniquely North Korean light industrial goods” independent of imports by substituting foreign materials for domestic ones, and to supply those goods to the people.

The provincial party also decided to promote domestically produced commercial goods, basic foodstuffs and groceries as good for one’s health as they are eco-friendly, and equal to those of any other country.

The source added that the party said the state would “thoroughly control” the import of raw materials for consumer goods or basic foodstuffs “that we could easily produce and use in our country (North Korea).” He also said the party said that controls could be placed on imports “unapproved by provincial, city or county commercial departments” at local markets “even if the border were reopened.”

Meanwhile, the source said the provincial party told officials that they should understand that the border closure “will never be lifted, even partially” this year and that they should supervise matters well.

(Source: Jong So Yong, “N. Korean Cabinet calls on commercial sector to eradicate the ‘import disease’,” Daily NK, 4/11/2021.)

As I noted on the blog earlier this week, Radio Free Asia has reported that authorities say the border won’t open for trade until 2025.

Obviously, you can’t keep the border both closed and open it at the same time. So how can these claims be squared? As with all news on North Korea relying on few sources or South Korean intelligence claims, a huge dose of skepticism is warranted. It is of course entirely possible that some of these claims will later prove to be inaccurate. No one knows when border trade might reopen.

But both reports could be true at the same time. Note especially this paragraph in the quote from Daily NK above:

In particular, the provincial party said the border closure was not just a measure to protect the people from COVID-19, but also to awaken government organizations, enterprises and people “full of illusions about imported goods” from their delusions. They stressed the need to satisfy the people’s demand for consumer goods with “products produced in our country (North Korea).”

This goes to the heart of the question about whether the government may be using the pandemic as an opportunity to push for policy changes it would have sought anyway. It has long been a central economic policy goal for North Korea to decrease its reliance on imports and instead improve domestic manufacturing. Kim Jong-un has spoken about it frequently, as did his father before him.

Particularly in this light, it seems possible that the government might resume some border trade with China that is particularly important for its political purposes (or otherwise urgent), such as construction materials, certain machine parts that cannot be domestically manufactured, and potentially fertilizer. At the same time, it might continue the overall border closure in the name of the pandemic, severely limiting the flow of goods, with decreasing the country’s reliance on imports as an important long-term policy goal in mind. So for the general public, the message may remain that they must cope with an economic reality where the border remains largely shuttered, while trade resumes in some strategically important goods.

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New Nautilus report on North Korea’s energy balance

Tuesday, May 4th, 2021

By: Benjamin Katzeff Silberstein

The Nautilus Institute recently published a very interesting report on North Korea’s energy balance sheet. Among other things, it contains estimate calculations of the energy intensity of various industrial sectors in the country. You can find it here.

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North Korean government continues state control push

Tuesday, February 23rd, 2021

By Benjamin Katzeff Silberstein

I’m not able to find the original article online at the moment, but Yonhap recaps an article from yesterday’s Rodong Sinmun stressing the importance of respecting government officials in the economic sector. This sounds like a fairly clear message to actors within the economy who might cause complications as plans for increased state control over the economy are implemented in practice: 

“We must respect economic officials in the administration and establish an orderly administrative system … so that administrative orders can be delivered down and accurately implemented without hesitation,” the Rodong Sinmun, the official newspaper of the ruling Workers’ Party, said in an editorial.

“The performance of this year’s goals depends heavily on how economic officials organize and carry out their work,” the paper added.

The paper also called on party officials to play the role of a “rudder” in economic projects, while urging them to strive to “possess expertise” in economics and technology.

North Korean state media have stressed the central role of the Cabinet in achieving the North’s economic goals since the recent party congress.

(Source: “N.K. paper stresses ‘respect for economic officials’ to achieve new objectives,” Yonhap News, February 22nd, 2021.)

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A crackdown on the North Korean market economy?

Tuesday, December 1st, 2020

By: Benjamin Katzeff Silberstein

(This is a rather long post with two parts: the first analyzes some recent events suggesting a government crackdown against the market economy, while the second recaps the some recent events within this trend. For readers interested primarily in the latter, I suggest scrolling down to the subheading “The events: a brief recap” below.)

Is the North Korean government cracking down on the market economy as such?

I would argue that we are not quite there yet, but an ever-increasing number of news seem to be suggesting that economic policy may be going in this direction. It’s also entirely possible that there is in fact no coherent strategy. One should not overestimate governments in general when it comes to coherence – this is nothing unique to North Korea. Nonetheless, these developments are crucial to keep a close eye on.

This post goes through some of the most central developments over the past few weeks below, but in short, some of these events are:

  • the general rhetoric and personnel politics from Kim Jong-un over the past year or so, repeated statements from high official organs about the need for economic control (most recently in a politburo meeting on November 30th),
  • the crackdown on foreign currency use and the reported execution of a foreign currency trader,
  • a reported change in the management of general markets to greater centralization and direct state control,
  • and last but not least (for now), an amendment to the enterprise law, effectively placing a common form of private enterprise under state scrutiny and administration.

This list is by no means exhaustive. For example, North Korean academic journals, often good proxies for what’s cooking in the policy circles, have repeatedly emphasized the need to “create an administrative system” since late last year. In North Korean parlance, this is likely code for increased state oversight and control. (Hat-tip to my good friend and colleague Peter Ward, perhaps the most thorough and dedicated researcher of North Korean journals in the analyst community.)

As I write more about in a forthcoming article for 38 North, the state has placed a high priority on reigning in – and at the very least, governing and administering – the market economy for some time, and with heightened intensity since the 2019 December plenum in particular.

There may, however, be more to it. There still is not sufficient evidence to conclude that the state is actively trying to stomp out markets or market mechanisms as such, but it is a possibility.

First, a basic question: if there is a general crackdown going on against the market economy, what would be the purpose? Again, no one knows, but one can speculate about a few different possibilities.

Perhaps most basically, North Korea is still, at least nominally and theoretically, a communist state with a centrally planned economy. Legally, private property does not exist. There has yet never been an official, explicit, major break with this model. We have often taken the state’s reluctance to crack down on the markets, and indeed, its occasional embrace of market mechanisms, as tacit acceptance that they are in the North Korean economy to stay. Maybe this assumption was wrong all along, or maybe things have changed over the past couple of years.

On the same theme, let’s not forget that North Korea’s political and social system is highly totalitarian. It is only natural that it would tend towards greater control, ultimately aiming to either eradicate or (more likely) tame groups such as the donju and integrate them into the official system. Economic reform and liberalization will always be potentially threatening, as they expand a sphere beyond state control, whether it be in the economy or society overall. Perhaps the North Korean leadership thinks the limit has been reached and it is time for a general rollback.

There may also be a pragmatic purpose to it all. As I have argued before, growing resource scarcity is a likely driver for increased economic control by the state. This is perhaps the most charitable and optimistic reading, as it suggests that the trend may one day be reversed.

Whatever the case, this is all troubling. The state and Kim Jong-un personally may very well be overestimating the capacity and potential of the state economy as an alternative to the market sphere. North Korea is a state with relatively capable governance in some areas, but with a very low capacity in others. Quite likely, the state simply has little grasp of the size of economic activity, and little overview of what this activity consists of. (See, for example, this recent report by Daily NK about a general survey of firms and enterprises leading up to the Party Congress in January 2021.) The border closure due to Covid-19, among other examples, shows that the state is prepared to accept a high degree of suffering among the general public for the purpose of social stability.

The events: a brief recap

The latest data point came a couple of days ago, at the latest of a staggering eleven politburo meetings this year. The KCNA summary contains two highly concerning paragraphs (my emphasis):

”The meeting discussed and studied as key agenda items the issue of hearing a report on the preparations for the 8th Congress of the WPK and taking corresponding measures, the issue of reorganizing a relevant department mechanism of the Party Central Committee to strengthen the field of the Party ideological work, to more thoroughly establish the Party’s leadership system in relevant institutions and to intensify policy guidance and Party guidance over them and important issues of improving the Party guidance over economic work and carrying out immediate economic tasks. Then decisions were made on them.”

And:

”The Political Bureau of the Central Committee of the WPK harshly criticized the economic guidance organs for failing to provide scientific guidance to fields under their charge under the subjective and objective environment and the prevailing conditions, and for failing to overcome subjectivism and formalism in their work. It stressed the need to put the operation and command for carrying out the Party’s economic policies on a scientific basis and display great dedication and responsibility.”

 

(Source: “Enlarged Meeting of 21st Political Bureau of 7th Central Committee of WPK Held,” Korean Central News Agency, November 30th, 2020.)

This comes against the backdrop of several similar statements from the politburo and other organs through the year and, not least, worrying measures, such as the reported execution of a foreign currency (among other measures) trader amid a strange appreciation of the won against the US dollar. Maeil Kyungje:  

“코로나19 확산에 위기감이 높아진 김정은 북한 국무위원장이 `비합리적 대응`을 하고 있는 것으로 보고됐다. 방역 위기에 경제적 어려움이 겹친 상황에서 환율 급락을 이유로 평양의 환전상을 처형하고 바다에서 어로와 소금 생산을 금지하는 등 무리한 조치를 취하고 있다는 것이다.

국회 정보위원들은 27일 국가정보원에서 최근 북한 동향을 이같이 보고받았다고 밝혔다. 정보위 야당 측 간사인 하태경 국민의힘 의원은 “김 위원장이 과잉 분노를 표출하고 있으며 상식적이지 않은 조치를 내놓고 있다”고 평가했다. 이날 국정원 보고에 따르면 김 위원장은 지난 10월 말 `평양의 거물 환전상`을 처형했다. 북한 내 환율이 최근 들어 급락했는데 이에 대한 책임을 물어 비공개 처형했다는 것. 북한은 외화난이 상시화했지만 국경 봉쇄로 외화 수요가 줄어 환율이 급락한 것으로 보인다. 하 의원은 또 “바닷물이 코로나19로 오염되는 것에 대한 우려 때문에 (김 위원장이) 어로와 소금 생산을 금지했다”고 말했다.”

(Source: Park Jae-wan, “Kim Jong-un executes foreign currency trader amid plunge in exchange rate,” Maeil Kyungje, November 27th, 2020.) See this Financial Times article for an English-language summary of events.

And then there’s the recent sudden appreciation of the won. Bill Brown explains this well here. It is, however, part of a broader push for people to use less foreign currency. There could be a whole host of reasons for this move, one of which could be to drive more of it out of circulation and into state hands. We still know too little to draw any firm conclusions.

Daily NK also reported a couple of weeks ago about new measures to centralize control over general markets under Party control. The report did not suggest direct measures to curtail market activity per se, but this may well be the consequence should the measure be fully implemented, with more red tape and central management further from the ground.

North Korea’s KCNA recently ran an article about two bills adopted by the Supreme People’s Assembly. One of them — a ban on smoking in certain areas — got quite a bit of attention, which lighter news from North Korea often does. The second one — an amendment to the country’s enterprise law — is, however, potentially much more significant, and could significantly curtail and hamper private business activity in the country. Here is what KCNA (5/11/2020) said about it:

”The amendments and supplements to the enterprise law newly point out such matters as of turning enterprises into labour-, energy-, cost-, and land-saving ones and making their employees patriotic working people who possess the spirit of economy as part of their mental qualities.

They also refer to the regulations which all the units must observe when organizing new enterprises or when changing their affiliations and those designed to ensure that production and business management are done on socialist principles under the unified guidance and strategic control of the state.”

Now, these few sentences reveal relatively little about what this could all mean in practice. Daily NK reported a few days later, however, that the government aims to centralize control of small business usually operating illegally, known as “kiji”, under official SOE frameworks. Corruption is certainly problematic in general, but given the fact that a massive proportion (or most) of private business in North Korea operates under frameworks that are technically corrupt, the ambition to strengthen government oversight may have serious adverse consequences. (For more on the “kiji” system, see this excellent journal article.)

In conclusion, it is too early to tell what the regime’s end goal is with these measures. At the very least, we can conclude that the state aims to lay more of the economy under its control and management. That is of course a central end goal in itself.

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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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The Pyongyang General Hospital and Kim Jong Un’s “Benevolent Dictator” Economics

Tuesday, July 21st, 2020

By: Benjamin Katzeff Silberstein 

On Monday (July 20th), Kim Jong Un visited the construction site for the Pyongyang General Hospital and unleashed some rather scathing criticism against the management of the project. An excerpt from KCNA:

Noting that it is making a serious digression from the Party’s policy in supplying equipment and materials to go against the intention of the Party which initiated the construction for the people and mapped out its operation, he severely rebuked it for burdening the people by encouraging all kinds of “assistance”.

Saying that the construction coordination commission failed to solve all the problems in conformity with the Party’s policy line, he said in the strong terms that if such situation is left to go on, the noble plan and intention of the Party which initiated the glorious and worthwhile construction for the good of the people could be distorted and the image of the Party be tarnished.

He instructed the relevant departments of the Party Central Committee to investigate the performance of the construction coordination commission as a whole and replace all the officials responsible and make strict referral of them.

Pointing out that though the construction work of the hospital was being pushed ahead thanks to the patriotic zeal and devoted efforts of the builders […].

(Source: “Supreme Leader Kim Jong Un Gives Field Guidance to Pyongyang General Hospital under Construction,” Korean Central News Agency, July 20th, 2020.)

The Pyongyang General Hospital project was destined for hurdles from the very beginning, as this article explores. Kim has personally emphasized how central it is to finish hospital construction by the deadline of October 10th this year, when the Korean Worker’s Party will celebrate its 75th anniversary.

With such time pressure for construction, worksite conditions were always going to be problematic. The politically motivated deadline, moreover, increases the risk of shoddy construction work. Rather than serve the general public at large, the hospital, whenever finished, is likelier to cater to the sociopolitical elite who can pay their way and, perhaps, to medical tourism.

Kim’s criticism against construction officials, however, is about much more than the hospital construction project itself. It relates to the very structure of the North Korean system, and of communist economies in general. This sort of criticism really is a standard performance in a decades-old genre, where the supreme leader shows himself to be on the side of the people by pinning the blame for any problems and suffering among the population on lower-ranking officials.

Kim’s public criticism of the construction management officials is, in other words, not exceptional, but a standard mechanism and a feature of North Korea’s economic system. Much in North Korean governance may be subject to dynamic change, but the one constant is that the leader can hardly ever be at fault.* To hold this constant, someone else must be blamed when economic plans don’t go the way they should. Never mind that the leader often rules by directives that are often vague and given in off-the-cuff-statements, left to subordinates to interpret and implement as best as they can. Problems like this are almost inevitable in an economy like North Korea’s, still in structure very much a command economy despite significant relaxations over the past few decades.

Thus, when the Soviet Union’s industrialization plan didn’t proceed as intended, it had to be the fault of wreckers working for foreign powers. Stalin himself could never be at fault. In the same way, it cannot, by definition, be Kim’s fault that people are overburdened with requests for “assistance” to help build the hospital. Lower-level bureaucrats have to be the ones to blame, for overburdening the people, because the leader can never be associated with direct pain and suffering in people’s daily lives.

In fact, such “assistance” – often termed “voluntary” – is a mainstay of the North Korean economic system and pretty much has been ever since the beginning. Kim surely cannot have missed the pictures and news reports in his own state media about “active support” from “the people”, and different localities sending construction materials. This sort of “voluntary labor” to gather materials for state projects or work on construction sites is of course not voluntary at all, as staying away would be punishable.

It is a facet of everyday life in North Korea that doesn’t get nearly the attention it deserves, as it often takes up a substantial number of hours. It is also not a new phenomena. The North Korean state has always demanded such “voluntary” contributions from the people to make up for materials and labor that the state cannot produce. Naturally, officials will use whatever means required to make their deliveries, even if these means are forcible. This applies to financial assets as well. The wealthier the trading middle class grows, the more the state will subject them to loyalty payments and the like.

In North Korea’s current situation, what choice does Kim really have but to blame lower officials for failures, and admonish them to do better? The Pyongyang General Hospital is not the only grandiose, heavily publicized project that is doing poorly. The Wonsan-Kalma resort has also been plagued by shortages and delays. The government needs these projects not least for propaganda value, to show to the country that although difficulties abound, all is not hopeless, the economy is still making progress, and people’s living standards will improve. So when none of the projects carrying this message are working out, the government has a problem.

In normal times, the state could have dismantled more economic regulations to make it easier for people to conduct trade and private economic activity. Indeed, though it is difficult to quantify, the state giving room for market mechanisms has been the most important factor for the significant improvements in the North Korean economy over the past few years.

Right now, this is difficult to do, because the state needs to extract more resources, not fewer. Over the past few years, the state has grown increasingly short of foreign currency and other assets, first because of sanctions, and later because of the Covid-19 border shutdown (which has partially ended). As a result, we’ve seen the state cracking down more and more on private business and market actors, to bring in resources as other avenues dry up.

The more difficult things get for the North Korean economy, the more demands increase for “loyalty payments” from private citizens, to fund the mega-projects that Kim has staked so much credibility on. We can expect to see more officials lose their jobs in the future in the same manner as those who got axed after Kim’s hospital construction field guidance.

 

*Such self-criticism does of course happen, but its rarity is attested to by the fact that it (rightfully) makes news headlines. One recent example is Kim Jong Un’s 2017 New Year’s Address.

 

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North Korea promoting Mt Kumgang tourism

Thursday, July 16th, 2020

By: Benjamin Katzeff Silberstein

Clearly, now is not the best time for tourism promotion. One might wonder what target audience is for the North Korean promotion website for tourism to Mt Kumgang. The website itself isn’t new, but as Yonhap/Korea Herald reports here, it’s recently been updated for the first time in a while. The update of a website perhaps isn’t the most riveting piece of news, but at the very least, it means that someone in some office in North Korea took time out of their day to keep this website maintained and updated with new pictures.

Even in non-Covid times, however, the success of Mt Kumgang under fully North Korean management is doubtful. Without cooperation with foreign partners, Mt Kumgang may meet the same fate as Masikryong, not exactly overcrowded with foreign visitors even before Covid hit. As I wrote in this column when North Korea confiscated Mt Kumgang, the success of the resort likely hinges upon South Korean and Japanese visitors coming in addition to tourists from China.

You can find the North Korean website in question here.

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What to make of the panic buying in Pyongyang and beyond

Sunday, May 10th, 2020

By: Benjamin Katzeff Silberstein

There’s been a few reports over the past few weeks about panic buying in Pyongyang, particularly of imported goods. The foremost reason appears to be the government’s restrictions of imports, aside from essential goods (whatever these are). A quick thought:

On the one hand, on a closer reading beyond the term “panic buying”, it’s apparent that we aren’t really talking about fundamental, daily necessities for the most part, but about imported items such as batteries and certain vegetables. When we monitor economic developments for social stability, such analyses tend to focus on items like rice and, at least in countries other than North Korea, fuel, and not least the stability of the currency. So it may not matter all that much if people in a northern province cannot buy lighters imported from China, or if Pyongyangites can’t buy imported pepper and other non-staple goods. (As you will see in one of the articles below, Daily NK has not heard reports of panic buying in Hyesan at all.)

At the same time, however, these imported goods are quite essential in the everyday lives of many people. We don’t know how much of imported goods the average person consumes, and I suspect it’d differ greatly between provinces. Since at least a significant proportion of the population consumes imported goods on a regular basis, these difficulties in acquiring items imported from China would in many cases cause great annoyance and, in others, disrupt production processes of firms and industries, although some exceptions are granted for “essential” items. Who determines what’s essential is likely hinges on political and economic clout, and it certainly won’t be the mom-and-pop-shops of the backstreet markets.

I’ve gathered a few related articles here. AP wrote about the topic on May 7th, 2020, with intelligence sources in Seoul confirming the news:

The NIS said it cannot rule out a virus outbreak in North Korea because traffic along the China-North Korea border was active before the North closed crossings in January to try to stop the spread of the virus, according to the lawmaker.

The NIS declined to confirm Kim’s comments in line with its practice of not commenting on information it provides to lawmakers. Kim did not discuss how the NIS obtained its information.

Last Friday, Kim Jong Un ended his 20-day public absence when he appeared at a ceremony marking the completion of a fertilizer factory near Pyongyang. His time away triggered rumors about his health and worries about the future of his country.

The NIS repeated a South Korean government assessment that Kim remained in charge of state affairs even during his absence. His visit to the factory was aimed at showing his resolve to address public livelihood problems and inject people with confidence, Kim Byung Kee cited the NIS as saying.

The NIS said the virus pandemic is hurting North Korea’s economy, mainly because of the border closure with China, its biggest trading partner and aid provider. China accounts for about 90% of North Korea’s external trade flow.

The trade volume between North Korea and China in the first quarter of this year was $230 million, a 55% decline from the same period last year. In March, the bilateral trade volume suffered a 91% drop, the NIS was quoted as saying.

This led to the prices of imported foodstuffs such as sugar and seasonings skyrocketing, Kim Byung Kee quoted the spy agency as saying. He said the NIS also told lawmakers that residents in Pyongyang, the capital, recently rushed to department stores and other shops to stock up on daily necessities and waited in long lines.

The NIS said prices in North Korea “are being stabilized a little bit” after authorities clamped down on people cornering the market, Kim said in a televised briefing.

(Source: “Seoul reports panic buying in N. Korea amid economic woes,” AP/Mainichi, May 7, 2020.)

NK News was one of the first outlets to cover the topic, in an article on April 22nd:

“Panic buying” sprees have been spotted taking place in some of Pyongyang’s stores and groceries since Monday, multiple informed sources told NK News, resulting in increasingly empty shelves and a growing shortage of key staples.

It’s unclear what’s led to the sudden surge in demand, with one source describing empty shelves and a sudden absence of staples like vegetables, flour, and sugar.

Locals have been buying “whatever is there,” one expat said, saying that “you can hardly get in” to some stores.

Both the expat and another person in Pyongyang said the surge was particularly notable on Wednesday.

Another source said large groups of locals were seen buying big amounts of mostly-imported products in some grocery stores, resulting in abrupt shortages.

(Source: Chad O’Carroll, “North Koreans “panic buying” at Pyongyang shops, sources say,” NK News, April 22nd, 2020.)

Daily NK, of course, has reported extensively on the topic, from both Pyongyang and the provinces. Imported goods are not only consumed in Pyongyang:

“The prices of Chinese goods have risen sharply in markets across the province, including the Yonbong and Wuiyon markets in Hyesan,” a Ryanggang Province-based source told Daily NK on Apr. 28.

According to the source, the price surge has mainly affected Chinese products, including daily necessities such as sugar, flour, and other cooking products.

For example, the price of Chinese seasoning has increased fourfold to a KPW 40,000 (around USD 6). Flour, rice and other grain prices have also increased. Two weeks ago, imported Chinese rice was being sold at KPW 4,400 per kilogram but is now being sold at KPW 5,500.

The price hikes have not just affected food. Chinese cigarettes have also increased in price: a box of Chinese-made Chang Baishan cigarette packs, for example, which used to cost KPW 12,000, is now KPW 17,000.

“Even Chinese lighters, which usually cost around KPW 700, have seen a price hike of nearly threefold and now cost KPW 2,000,” the Hyesan-based source added.

The main reason for these price surges is the halt in Sino-North Korean trade following the closure of the North Korean-Chinese border in late January. The effects of the steep fall in Sino-North Korean trade were made clear in recent data published by China’s General Administration of Customs. According to this data, Chinese-North Korean trade in March dropped by 91.3% compared to the same period last year to just USD 18.64 million.

“Just two weeks ago merchants were feeling more optimistic given the improved situation in China. Now, they’ve lowered their expectations quite a bit,” the Hyesan-based source told Daily NK, adding, “Prices are rising because business people are intentionally sitting on their stocks with the hope that prices will increase even more.”

[…]

Meanwhile, Daily NK is unaware of any reports of panic buying in Hyesan [emphasis added].

(Source: Kang Mi Jin, “Ryanggang Province witnesses price spikes,” Daily NK, April 30th, 2020.)

And, more recently, a report from Pyongyang:

“There are a lot of ordinary stores that have closed or are unable to sell anything because they have no stock left,” a Pyongyang-based source told Daily NK on Apr. 30. “Right now 100 grams of imported pepper costs KPW 40,000, 450 to 500 grams of MSG costs KPW 48,000 and sugar can’t be found at all.”

PRICE SPIKES

The prices of imported food items nearly doubled after Apr. 17, when the North Korean government announced restrictions on imported goods deemed “unnecessary” for the North Korean economy. Prices began to rise rapidly once more before the publishing of this article in Korean on May 1.

According to Daily NK’s Pyongyang source, the price of imported pepper was just KPW 8,000 per 100 grams before the announcement, but doubled to KPW 16,000 after the decision was released. Now, the price has reportedly risen to KPW 40,000.

“The price of watch batteries and other small batteries for common household appliances like remote controllers for TVs have tripled or quadrupled,” the source further reported. “The price of batteries had remained stable even after the announcement, but several days ago it started to rise suddenly. The spike is probably because so many people began hoarding them.”

Although the price of batteries has risen to an unprecedented degree, Pyongyang residents reportedly continue to buy them in bulk, in boxes of 50, and as much as 10 boxes at a time. The hoarding is likely due to concerns that the price will only continue to rise and that soon there may not be any batteries left to buy.

“Many of the electronics stores throughout the city have closed down,” the source said, adding, “Stores that still have stock have closed perhaps because of rumors that Chinese products will no longer enter the country.”

In short, the source’s report suggests that state-run electronics stores, which command 20% of the market, have no stock left, while privately-run stores that take up the remaining 80% of the market have closed up despite still having stock on hand.

Based on the source’s report, owners of privately-run stores may have closed down their shops with the intent to sell their goods at prices even higher than they are now. The owners are likely under the belief that the recent import restrictions announcement means that various electronics accessories will no longer enter the country from China for some time.

(Source: Ha Yoon Ah, “Pyongyangites continue to hoard as prices keep rising,” Daily NK, May 4th, 2020.)

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