North Korea’s continuing social change

June 20th, 2008

The Daily NK posted a fascinating interview with a local North Korean merchant.  He provides interesting anecdotes of everyday life:

Tongil Market (Featured in A State of Mind):

Nowadays, the way to survive is selling in the jangmadang (market). With the exception of the residents of the Joong-district and its vicinity, who are often mobilized to national events, seven out of 10 households do business in the jangmadang. In the Pyongyang Tongil (unification) Market alone, the number of people doing business is between 5,000~6,000 people. The size of a street-stand is approximately 50cm by 50cm large. There are also about 2,000 people selling outside of the market.”

“There are people also selling in the alleyways. The Tongil Market usually consists of people from the Tongil Street, so merchants from the other regions cannot do business there. In the Tongil Market alone, there are around 8,000 people [doing business]. Because the Market is so large, the cadres from the other regions frequently come to buy goods.”

Even in North Korea, capital enhances worker productivity: 

Mr. A said that in the markets, the sale of industrial goods (all kinds of products such as clothing brought from China) and cosmetics are supposed to be lucrative. The traders usually bring in about 5,000 won per day and 15,000 won per month. Such an amount of money can buy about 2kg of rice per day. The people who make a lot of money are the marine product merchants. They make around 7,000~8,000 won per day. Marine products are often purchased by officials who have money and rice.

The people in the lowest class do not have the capital to do business, so a majority of them sell noodles or food. They make about 1,500 won per day, which can purchase about a kilogram of corn. People who sell food sell rice, sidedishes, and snacks on site. To them, selling is a battle to survive.

Coping mechanisms:

Mr. A relayed that not-so-affluent households raise several domestic cattle, collect medicinal herbs or brew liquor to sell. The remnants of the liquor are used as livestock feed. Selling two bottles of liquor made of corn as raw material generates about 500 won in profit. However, the authorities have strictly been regulating brewing liquor in homes, resulting in difficult situations. If exposed for making liquor, both the person-in-charge and the People’s Party Unit chairman are banished to the countryside.

Beekeeping is seasonally supposed to be lucrative. In May when the acacia flowers start to bloom, the number of people who collect honey in the mountains increases. In the surrounding areas of Pyongyang, there are at least trees on the mountains, so beekeeping has been feasible. One person can collect about 100kg of honey per month by keeping around 15 beehives. The honey is usually consumed by people who want to use it in medicine or by officials.

Work overseas:

“The utmost goal of workers in Pyongyang is to go to another country to earn money. Recently, they have even gone to the Middle East, Southeast Asia, Africa, and the Democratic Republic of Congo. Once they leave, they do not return for three years. They can go back or stay in Pyongyang. Workers who have gone to Russia or to Congo for farming come back with 10,000~20,000 dollars in three years.”

“With that money, they can buy a house and prepare a significant amount of capital for business. Those who have gone abroad not only do the work ordered by organizations, but also engage in private farming, do business and save as much money as they can. There have been a quite a few people around me who have gone abroad recently to make money this way. Out of 100 male workers, there is at least one or two. In order to go overseas, one has to pay 300~400 dollars in bribes.”

Read the full article here:
Doing Business Is a Battle
Daily NK 
Jung Kwon Ho
6/18/2008

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DPRK food prices falling?

June 19th, 2008

The Daily NK reports food prices are falling in North Korea on news that international aid is due to arrive—proving that although the politics might not make much sense, the economic actors are rational: 

The price of rice in Pyongyang ha[d] risen to 3,000 won per 1kg, but since late May, the high-quality polished rice has been around 2,500 won, the medium quality rice around 2,400 won and unpolished brown rice around 2,300 won. Wild rice imported from Northeast Asia has been around 2,300 won. [Which was the price in April].

The price of corn is still around 1,500 won. Rice is not lacking in the jangmadang [markets], but corn has been. The reason for that is that last year, there was a rumor that planting soy and making tofu is lucrative, so everyone planted soy instead of corn.”

UPDATE: The article does not suggest that the food situation is getting better.  People are also economizing their consumption which mutes demand to some degree (eating two meals a day for instance). 

Read this very interesting article here:
Doing Business Is a Battle
Daily NK 
Jung Kwon Ho
6/18/2008

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Russia donates food to DPRK

June 19th, 2008

After China and the USA made high-profile food donations to North Korea, the Russians finally joined the game.  Russia’s Foreign Minister claims that by the end of June his country will have sent 3,000 tons of flour to UN World Food Program distributors in North Korea. The first aid deliveries arrived in North Korea by train on June 11.

I am surprised Russia waited so long to get into the game.  Russia has been prodding North Korea to link its Trans-Siberian rail traffic to South Korea, and they want to make sure the Chinese don’t squeeze them out of North Korea’s Raijin Port (which does not freeze in the winter).  Food aid might not have helped these processes along, but waiting so long to jump on the bandwagon can’t have helped. 

In March of this year, the Russians inked a deal to renovate the railway lines between their border and Raijin (the tracks are different gagues).

Read about the aid here: 
Russia to deliver 3,000 tons of flour to North Korea
Novosti
6/9/2008

Russia sends food aid to North Korea
Associated Press
6/19/2008

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DPRK economy shrinks for second year: Bank of Korea

June 17th, 2008

North Korea does not publish economic data.  The size of North Korea’s economy is estimated by South Korea’s Central Bank (Bank of Korea), the US Central Intelligence Agency (CIA), and other think tanks such as the Sejong Institute (Lee Jong Seok)

According to a recent report by the Bank of Korea, North Korea sufferd its second full year of economic contraction (as defined by GDP), 1.1% in 2006 and 2.3% in 2007.  The bank estimates North Korea’s 2007 gross national income (GNI/GNP) at $26.7 billion, per capita GNP at $1,152 (assuming population of 23 million).  If you are interested in knowing the difference between GNP and GDP, click here.

Here are some highlights from the report:

Agriculture, forestry & fisheries marked a 9.4% decrease following a 2.6% decrease in 2006

Mining increased 0.4% in 2007, down from 1.9% increase in 2006

Manufacturing increased 0.8%, higher than 0.4% 2006 increase. -1.7% growth in light industry, due to the decrease in food products and beverages. +2.3% growth in heavy industries led by expansion of metal and machinery products.

Electricity, gas & water production increased 4.8%, (+2.7% in 2006), from hydroelectric and steam power generation.

Construction production -1.5%, (-11.5% in 2006), from reduced non-housing construction and civil engineering.

Services +1.7%, (+1.1% in 2006). Hotel, restaurant, transport, post & telecom industry expanded.

Trade volume (goods) fell 1.8% to $2.941 billion, 1/248 South Korea’s. Exports fell 3.0%, imports fell 1.3%.

These estimates are based on trade figures obtained from the Korea International Trade Association, Korea Trade and Investment Promotion Agency, fuel and food aid figures from aid groups such as the International Red Cross and the World Food Program, as well as information provided by frequent visitors.

More information here:
Full report by Bank of Korea  and data (recomended)

North Korea’s Economy Shrank in 2007, Second Annual Contraction
Bloomberg
Heejin Koo
6/17/2008

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How much food do they need?

June 17th, 2008

A few weeks ago, I speculated that no one knows how much food the North Koreans really need, even the DPRK government.

On one side of the debate, the UN World Food Propgram claims that North Korea has a 1.67 million ton grain shortfall leaving 6.5 million individuals at risk.  These are North Korea’s numbers and the WFP/FAO is required to accept them.

On the other side of the debate, Marcus Noland and Stephan Haggard argue the DPRK’s grain shortage is closer to 100,000 metric tons.  The discrepancy arises because the UN’s estimate is based on individuals needing 460 grams of grain per day to sustain life, but in reality, grains are supplemented by potatoes and other vegetables, lowering the amount of aid needed to sustain the population.  Their calculations are explained here.

South Korea’s National Intelligence Service and Ministry of Unification buttress the Noland/Haggard assertion that things are not as bad as the UN numbers suggest (Daily NK). 

In an effort to document the state of affairs via field research, the UN WFP is conducting a survey across 50 counties in the DPRK.  According to the BBC:

Staff from the UN World Food Programme have been given rare access to North Korea’s countryside to assess the seriousness of food shortages there.

The audit, being carried out across more than 50 counties, comes at a critical time.

Some recent reports suggest that the country may be on the brink of famine.

North Korea is estimated to have a shortfall of 1.6 million tonnes of grain because of last year’s flood-affected harvest.

But a true picture of the scale of the crisis is very difficult to determine.

Twelve WFP staff and eight US aid agency workers are now fanning out through North Korea, albeit with government minders, visiting hospitals, schools and individual households.

Their work is expected to take two weeks, by which time the world should have a much clearer understanding of the true nature of North Korea’s food crisis.

Here is the World Food Program’s North Korea Page.  I have not found anything on the survey team, methodology, or operations.  I will post something here if I do.

Read the full artilces here:
Balance of Principle and Flexibility Are Needed When Providing Food Assistance to North Korea
Daily NK
Choi Choel Hee
6/16/2008

Asia’s Other Crisis
Newsweek
Stephan Haggard and Marcus Noland
6/26/2008

UN assesses N Korea food supply
BBC
John Sudworth
6/17/2008

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The People’s Safety Agency’s Authority Is Strengthened

June 17th, 2008

Daily NK
Moon Sung Hwee
6/17/2008

The Central Committee of the Chosun (North Korea) Workers’ Party recently commanded the People’s Safety Agency (PSA) to increase its authority.

A source from North Korea reported in a telephone interview with Daily NK on the 11th that “According to a document from the Central Committee of the Party, the legal authority of agents of the PSA is being strengthened.”

The source explained that “From now on, agents of the PSA can investigate every criminal offense committed by the military, the National Security Agency, the public prosecutors and cadres of courts. This command from the Party was delivered to the cadres’ lectures over the country on May 10.

The most remarkable part is that in every field except anti-nation or anti-regime crimes the PSA can inspect and search the houses of suspects from the military, the Party, the NSA and the public prosecutor’s office.

Through this, control over the military, which abused its power and was acknowledged as a public enemy by average residents for a decade under the military-first policy, is being systematized.

The document stated clearly that the PSA has the right to detain anyone who disobeys the agents’ onsite inspections in their homes and even to arrest them, according to the source.

One proviso only was added that when the agents undertake a house search of the cadres of the Party, they have to receive prior approval from upper levels within the PSA and they do not have the authority to arrest cadres of the Party on the spot as a suspect.

The source explained that up to this point general crimes committed by soldiers were just dealt with by the military police or the Defense Security Command of the People’s Army. Since the Shimhwajo Case in 1998, the PSA has not examined the cadres of the NSA or prosecutors.

The source relayed that regulations regarding punishment towards agents who intentionally overlook an inspection or who leak information on an inspection are specified in the document.

Since Jang Sung Taek, a brother-in-law of Kim Jong Il, led the Ministry of Administration of the Chosun (North Korea) Workers’ Party, the political authority of the PSA accordingly started being strengthened. The source explained that “In the past, the PSA was not able to intervene in any case without the permission of the prosecutors, but since October 2007 the agents of the PSA were granted the authority to deal with the arrest of criminals and with sending them to court themselves.

The position that Jang Sung Taek took in October 2007 was that the Director of the Ministry of Administration of the Chosun (North Korea) Workers’ Party is responsible for general public security organizations such as the National Security Agency, the People’s Safety Agency, the Central Prosecutor Office and the Special Court.

The source analyzed that “The Party did not push legislation on the expansion of the authority of the PSA, because political conflicts with other governmental organizations would be brought out.”

Some say that the background to the promotion of the PSA stems from Kim Jong Il’s fear that the authority of the NSA and of the military were too big while the Party’s power was extraordinarily weakened.

One other source said that “Although the military or information organizations have attempted many coups in human history, the police force has always sided with the government. Therefore, Kim Jong Il drastically strengthened the authority of the PSA.”

The source added that “Regarding the promotion of the PSA, the cadres of the Party took concrete examples of assassinations such as Nicolae Ceauşescu of Romania and Park Chung Hee of South Korea, emphasizing the Romanian police’s fight against the military in order to protest Ceauşescu.”

“The People’s Safety Agents,” which is a newspaper circulated just in the PSA, and lecture materials for the PSA lately describe the PSA as the “escort warrior for the General” or “the second Escort Bureau,” the source explained, regarding the change of the PSA’s state.

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British football association donates sportswear to DPRK

June 17th, 2008

From Yonhap:

The British Football Association has donated some 600 items of sportswear such as gym suits and sweat pants to North Korea, a pro-Pyongyang daily in Japan said Tuesday.

The sportswear was delivered to the North Korea’s football association in a ceremony held in Pyongyang on Thursday with the British Ambassador to the country John Everard attending, the Choson Sinbo newspaper said.

Read the full article here:
British football association donates gym suits to N.K.: report
Yonhap
6/17/2008

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DPRK embraces comparative advantage to strenghten foreign economic relations

June 17th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-6-17-1
6/17/2008

According to an article run in the June 10 issue of the Rodong Sinmun, the newspaper of the North Korean Workers’ Party, economic independence “is not closing the doors and solving everything 100 percent on our own,” and stressed the fundamental rule of ‘selling what is present and buying what is missing’, otherwise known as comparative advantage*, as the key to advancing overseas foreign economic relations.

The newspaper article, titled, “The Main Principle for Maintaining the Basic Path Toward Construction of a Powerful Economic State,” explained, “In every country there are limited resources, and at the level of advancement of the economy as well as science and technology, and on the principle of trading based on what is available and what is necessary in each sector, it is normal to give what one has and receive what one does not in order to advance the economy.”

This fundamental rule of strategic trade can also be seen in the July 2005 agreement reached at the 10th meeting of the South-North Economic Cooperation Promotion Committee. At the time, the two Koreas agreed to mobilize natural resources, funds, technology, and more as much possible, based on what was available in each state, in order to advance joint national projects.

The newspaper stressed that “not mobilizing domestic preparations and possibilities and relying entirely on outside [powers] to advance the economy is, in the end, putting the fate of the economy in someone else’s hands…by fully mobilizing in-country forces and potential as a base, resolving necessary issues through foreign economic relations is just secondary.” The article added that the country “must stand by this principle to build a strong economy with an independent strength that would not waver even if there were global economic waves,” and that this would, “increase and guarantee the physical livelihoods of the people.”

The article closed by noting, “the important, fundamental issue as [North Korea] maintains the basic path toward the construction of a powerful economic state…is keeping the economic structure’s distinctive qualities alive while technically reviving the people’s economy,” and furthering the development of heavy industries and national defense industrial sector.

_______________

*North Korean Economy Watch: “This is not the definition of comparative advantage.  Click here for wikipedia.”

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Border guards and North Korea’s food shortage

June 16th, 2008

Last autumn, Chinese rice sold for 900 won/kg in northern North Korea.  The Chinese Yuan’s appreciaiton, combined with food export restrictions, caused North Korean rice prices to increase to about 2,000 won/kg this year.

Where does this money go, and what can these prices tell us?

According to an article in the Daily NK, this is how the retail rice price breaks down: 

37,600  won = purchase price for 25kg sack of Chinese rice
10,000 won = DPRK border guard bribe
+ 3,750 won = Chinese smuggler commission (150 won/kg x 25kg)
51,350 won = Korean smuggler purchase price (2,054 won/kg x 25kg)
+ 3,750 won = Korean smuggler markup (150 won/kg)
55,100 won = Retail vendor purchase price (2,204 won/kg x 25kg)

If the above numbers are true, combined middlemen commissions (Chinese and Korean smugglers) comprise just 13% of the retail price, bringing them just over $1USD per 25kg bag (appx 3,000 won=$1USD).  This indicates the field is fairly competitive.   In fact, border guards make more than both the Chinese and North Korean smugglers combined, for much less effort.  In all fairness to the border guards, they have families to feed as well and each probably paid a hefty amount for his job.  Besides, if they were not so corruptible, North Korean food prices would be higher.  Since North Korea can’t get rid of their border guards, the next best thing we can hope for is lots of corrupt ones.  If the market is competitive, North Korean consumers could see rice prices fall up to 18%.

Read the Daily NK article here:
What Is the Truth of the Food Crisis in North Korea?
Daily NK
Moon Sung Hwee
6/6/2008

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North Korea will attend ASEAN meeting

June 15th, 2008

From the Bangkok Post

North Korea, one of the world’s most reclusive nations, will attend the Association of Southeast Asian Nations (Asean) meeting in Singapore next month, Singaporean Foreign Minister George Yeo said.

Mr Yeo made the announcement last week during his meeting with Thai journalists on an exchange programme.

Asean foreign ministers agreed to invite North Korea to sign Asean’s Treaty of Amity and Cooperation (TAC) during an informal conference in Singapore in February.

Pyongyang joined the Asean Regional Forum in 2000 and has diplomatic relations with Asean nations. If North Korea signs the TAC, it would be considered a great advancement for peace-building in the Asia-Pacific region.

TAC is a regional code of conduct which encourages the peaceful resolution of conflict through dialogue.

TAC has been adopted by 24 countries, including the 10 Asean nations.

Read the full article here:
North Korea will attend ASEAN meeting
Bangkok Post
Anchalee Kongrut
6/16/2008

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