Posts Tagged ‘Corona’

The wild fluctuations of North Korean exchange rates

Wednesday, May 20th, 2020

By: Benjamin Katzeff Silberstein

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

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

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

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

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

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

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

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

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

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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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North Korean economy updates, April 21st, 2020: schools opening, market prices down

Tuesday, April 21st, 2020

By: Benjamin Katzeff Silberstein

Here’s a brief compilation of some recent developments in the North Korean economy, mainly relating to the COVID19-situation, as most economic developments in the world are at the moment.

In recent reports, rice prices are down on markets, and quite significantly so. The average market price declined by around 19 percent between March 20th and 28th. Obviously, there is a reporting time lag here, but that can’t be avoided. Rimjingang’s latest reported figures (much earlier) are different but tend in the same direction.

Gasoline prices remained almost entirely stabile over the same period, climbing by 0.3 percent. The entirety of the price increase happened in Pyongyang, interestingly enough. As is generally the case, prices in Sinuiju are significantly lower than in the rest of the country, likely due to its proximity to China and North Korea’s main refinery near the border.

At the same time, we shouldn’t be too quick to assume this trend toward price stability will continue. There are currently no signs that border traffic will resume anytime soon, and this is very troubling not least because items such as fertilizers are in dire need for the approaching planting season (as noted by both NCNK and Rimjingang). While the latter reports that China is now refusing to start trade back up again in fear of COVID19 cases entering the country, Daily NK reports that Chinese trucks are crossing the bridge from Sinuiju, presumably after offloading goods in North Korea. North Korea is constructing a fertilizer factory in Suncheon, but reportedly struggling for construction parts and equipment.

This week, North Korea re-opened some schools and universities, after the extended winter break implemented as a measure against the spread of COVID19. Here is a rather chipper and, in its own way, very interesting clip from what is presumably a twitter account run by the North Korean government.

Finally, in some non-COVID-news, the re-forestation campaign apparently continues in the country. Rodong Sinmun ran an article on Tuesday April 21st about sapling research at Kanggye University. (Here is a link though I’m not sure it works.) And Rodong claims that coal production in one of the country’s mines is increasing due to better inefficiency. We have no way of telling whether this is true, but North Korean media touting coal production given the way things currently stand is interesting. Perhaps a tacit way of acknowledging, and touting, what the latest UN Panel of Experts report claimed about the significant amounts of coal exported by North Korea despite the sanctions in place to prevent it from doing so.

 

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Politburo meets, but SPA postponed (till following Sunday)

Sunday, April 12th, 2020

Benjamin Katzeff Silberstein

The SPA was expected to meet this past Friday. It didn’t. (Update 13/4/: it instead met on the following Sunday.) Instead, the politburo held a meeting to discuss measures the SPA would be adopting. There were scant but clear references to economic affairs (highlighted below), though the KCNA report is very vague. NK News suggests the SPA may instead convene Monday.

It adopted the joint resolution of the Central Committee of the WPK, the State Affairs Commission of the DPRK and the Cabinet of the DPRK “On more thoroughly taking national measures for protecting the life and safety of our people from the worldwide epidemic disease”.

The joint resolution detailed the goals of continuously intensifying the nationwide emergency anti-epidemic services and pushing ahead with the economic construction, increasing national defence capability and stabilizing the people’s livelihood this year, and indicated the tasks facing every field and every unit including Party and government organs and working people’s organizations and armed forces organs and ways of carrying them out.

It studied and approved “On the execution of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020)”, the second agenda which is to be presented to the Third Session of the 14th Supreme People’s Assembly.

(Source: Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un, Korean Central News Agency,” 12/4/2020.)

Update 13/4/2020: the SPA was held on Sunday instead. KCNA:

The third Session of the 14th Supreme People’s Assembly (SPA) of the Democratic People’s Republic of Korea (DPRK) was held at the Mansudae Assembly Hall on Sunday.

The SPA deputies attended the session.

Seen on the platform were Choe Ryong Hae, member of the Presidium of the Political Bureau of the Central Committee of the Workers’ Party of Korea (WPK), first vice-chairman of the State Affairs Commission (SAC) of the DPRK and president of the Presidium of the SPA, and Pak Pong Ju, member of the Presidium of the Political Bureau of the WPK Central Committee, vice-chairman of the SAC of the DPRK and vice-chairman of the WPK Central Committee.

Also seen there was Kim Jae Ryong, member of the Political Bureau of the WPK Central Committee, member of the SAC of the DPRK and premier of the Cabinet.

The platform was also taken by Ri Il Hwan, Choe Hwi, Ri Pyong Chol, Kim Tok Hun, Kim Yong Chol and members of the SAC of the DPRK and the Presidium of the SPA.

The chairman and vice-chairpersons of the SPA took their seats.

The opening address was made by Chairman Pak Thae Song.

The agenda items of the Third Session of the 14th SPA of the DPRK were decided at the session:

1. On adoption of the law of the DPRK on recycling resources

2. On adoption of the law of the DPRK on tele-education

3. On adoption of the law of the DPRK on providing living conditions for discharged officers

4. On the work of the Cabinet of the DPRK for Juche 108 (2019) and its tasks of Juche 109 (2020)

5. On implementation of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020).

6. Organizational matter.

The first, second and third agenda items were discussed at the session.

Deputy Thae Hyong Chol, vice-president of the Presidium of the SPA, made a report on the three agenda items.

He referred to the importance and significance of the laws to be discussed and adopted at the session, and explained the chapters of the laws.

He laid the adoption of the three laws before the SPA.

Ordinance of the SPA of the DPRK “On adoption of the law of the DPRK on recycling resources “, “On adoption of the law of the DPRK on tele-education” and “On adoption of the law of the DPRK on providing living conditions for discharged officers” were adopted with unanimous approbation at the session.

There was a discussion on the basis of an in-depth study of the reports on the fourth and the fifth agenda items.

The speakers said that the work of the Cabinet and the execution of the state budget for last year were correctly summed up, and that the tasks of the Cabinet for this year were clearly set and the state budget was properly worked out in the direction of implementing the decisions adopted at the 5th Plenary Meeting of the 7th Central Committee of the WPK and the joint resolution adopted at the Meeting of the Political Bureau of the WPK Central Committee. They voiced full support and approval.

In their speeches they analyzed and reviewed the successes, experience, mistakes and lessons in the work of their fields and units last year and referred to the methods of opening a broad avenue to the socialist construction and propping up the self-supporting economic power.

There adopted decision of the SPA of the DPRK “Report on the work of the Cabinet of the DPRK and on approving the implementation of the state budget for Juche 108 (2019)” and ordinance of the SPA of the DPRK “On state budget of the DPRK for Juche 109 (2020)”.

The session discussed the sixth agenda item.

At the request of Deputy Choe Ryong Hae, first vice-chairman of the SAC and president of the Presidium of the SPA upon authorization of the Chairman of the State Affairs Commission of the DPRK, Deputy Choe Pu Il and Deputy No Kwang Chol were recalled from the membership of the SAC.

Also recalled were Ri Su Yong, Thae Jong Su and Ri Yong Ho.

Deputies Ri Pyong Chol, Kim Hyong Jun, Kim Jong Gwan, Ri Son Gwon and Kim Jong Ho were by-elected as members of the SAC.

Upon authorization of the Political Bureau of the WPK Central Committee, Deputy Ko Kil Son was by-elected as the secretary general of the Presidium of the SPA and Deputy Kim Yong Hwan as a member of the Presidium of the SPA.

Members of the Cabinet were newly appointed.

Upon authorization of the WPK Central Committee, Deputy Yang Sung Ho was appointed as vice-premier, Deputy Kim Chol Su as minister of Natural Resources Development, Kim Jong Nam as minister of Machine-building Industry, and Ri Song Hak as minister of Light Industry.

Chairmen of the Subcommittees of the SPA were recalled and by-elected.

Deputy Kim Jong Ho was by-elected as chairman of the Legislation Committee of the SPA, Deputy Kim Tok Hun as chairman of the Budget Committee and Deputy Kim Hyong Jun as chairman of the Foreign Affairs Committee.

Chairman Pak Thae Song made a closing address.

(Source: “Third Session of 14th SPA of DPRK Held,” Korean Central News Agency, 13/4/2020.)

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North Korean public health expert claims zero coronavirus cases

Thursday, April 2nd, 2020

Benjamin Katzeff Silberstein

In an interview with Kyodo earlier this year:

Pak Myong Su, president of North Korea’s State Hygienic Control Board, made the remark in an interview with Kyodo News and other foreign media outlets.

“If such a virus spreads in our country with a small population and a small territory, a serious disaster could not be avoided, in which thousands or tens of thousands of people are deprived of their lives,” Pak said in Pyongyang.

In mid-March, Gen. Robert Abrams, the commander of U.S. forces in South Korea, said at a press conference that North Korea “is a closed-off nation, so we can’t say emphatically that they have cases, but we’re fairly certain they do.”

South Korean media have also reported that many North Koreans have died from the pneumonia-causing virus currently sweeping the world.

Late last month, Japanese Foreign Minister Toshimitsu Motegi told reporters in Tokyo, “If there is no infected person in North Korea, which is contiguous with China and South Korea, it is extremely miraculous.”

Pak stressed that North Korea has stepped up measures to prevent a coronavirus outbreak, including cutting off traffic to and from China and Russia since earlier this year.

He added that citizens have been urged by the country’s health authorities to wear masks when they go outside.

(Source: “N. Korea has no infected people with new coronavirus: expert,” Mainichi/Kyodo, April 2nd, 2020.)

I’ve written here about why this is extremely unlikely to be true, bordering on the impossible.

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April 1st, 2020: Latest market prices in North Korea

Wednesday, April 1st, 2020

By: Benjamin Katzeff Silberstein

In the past few days, Daily NK updated their market price index. The latest price data was sourced on March 20th, but posted at least a couple of weeks later. A few quick observations:

In general, rice prices continue to decline, although not by very much. The average rice price went down by 1.4 percent from the previous price observation, on March 7th. This is hardly enough to be truly significant. As I wrote on 38North recently, the price drop may not be caused by an increase in supply only, but also by increasing enforcement of price controls by the government.

Foreign exchange rates have appreciate significantly since before the coronavirus border closure, and continue to climb still. The RMB has, interestingly, appreciate much more than the US dollar. The dollar climbed by 1.4 percent in the last price observation compared with late December last year, while the RMB went up by almost ten percent during the same time period. Between March 7th and March 20th, the USD appreciate by 0.55 percent, and the RMB by 1.2 percent. North Korea thereby goes counter to the international trend, where the dollar has appreciated significantly over the RMB. This makes sense, however, since the border closure has cut the supply of Chinese goods drastically, thereby raising their price. A significant share of trade in these goods occurs in RMB, and it is only logical that the price would go up.

More on this during the weeks to come…

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Fertilizer shortages in North Korea due to border lockdown

Wednesday, April 1st, 2020

Benjamin Katzeff Silberstein

Reports Daily NK:

North Korea’s farms in the country’s breadbasket are suffering from a lack of fertilizer and other agricultural supplies amid the shutdown of the Sino-North Korean border, Daily NK sources have reported.

“Farms are lacking agricultural supplies throughout the province even as we are heading into the planting season,” a North Hwanghae Province-based source reported on Mar. 31.

North Korean farms typically focus on preparing for the year’s farming during January to March, acquiring needed fertilizer, pesticides and other supplies.

The country’s agricultural sector, however, relies on imports of agricultural supplies and typically trading companies are putting on all their efforts into acquiring supplies during this period.

With the closure of the Sino-North Korean border and a general halt in trade and smuggling across the border, however, farms are not getting the supplies they need this year.

“North Korean authorities are telling farms to figure out things themselves, even telling them to make their own electricity,” the source said. “Farmers are upset.”

North Korean officials have moved to increase supplies of fertilizer to farms by ordering fertilizer factories throughout the country to increase their production beyond this year’s original production quotas.

“Factory managers are full of anxiety because they have to create massive amounts of fertilizer – more than they are accustomed to,” the source noted.

North Korean cities and counties typically have their own fertilizer factories. Most of these factories, however, are small-scale and are unable to produce enough to supply all the farms in their respective areas.

(Source: Ha Yoon Ah, “N. Korea’s farms face shortages of fertilizer and other supplies,” Daily NK, April 1st, 2020.)

More than immediate rice prices rising, this sort of news is perhaps the most concerning in the long run, and we’ll only begin to see the effects in a few months.

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North Korean ships not stopping in Chinese ports

Sunday, March 29th, 2020

Benjamin Katzeff Silberstein

The New York Times reports that North Korean ships that would usually transport goods to Chinese ports are now idle in Nampo:

The Royal United Services Institute satellite analysis shows that on March 3, 139 ships were idled in the Nampo area, which includes the anchorage and several ports, up from 50 ships a month earlier.

The fleet includes vessels previously implicated in sanctions evasion operations, which are often tracked through satellite imagery and aerial or ground surveillance by other states, independent research groups and the United Nations.

The institute’s analysis said the idled ships included some of the “most active and scrutinized oil tankers” used for the illicit import of refined petroleum products such as fuel. For example, the oil tanker New Regent, which had been spotted making unreported deliveries as recently as January 2020, and twice in 2019, according to the United Nations, was seen in Nampo in multiple satellite images. Other ships, too, have been floating unused for weeks, according to satellite imagery provided by Planet Labs, an earth-imaging company in San Francisco, and Maxar Technologies Inc., a space technology company in Westminster, Colo.

(Source: Christopher Koettl, “Coronavirus Is Idling North Korea’s Ships, Achieving What Sanctions Did Not,” New York Times, March 26, 2020.)

As the article points out, coronavirus really is doing what sanctions never fully could. It seems that the only fully confirmed mode of goods transportation between North Korea and China right now are trains (judging by the Rodong pictures of Corona prevention activities), and we don’t know how often they run.

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Of price controls and panic: North Korean market prices under Corona

Friday, March 27th, 2020

By: Benjamin Katzeff Silberstein

(Note: the graphs in this piece are from a shortly forthcoming article on 38 North.)

It’s almost like those mandatory disclaimers that often follow advertisements in the United States, but the statement that all information from inside North Korea is uncertain can sometimes not be repeated often enough. This is especially true in a situation like the current one, where the country’s borders are virtually shuttered, and global anxiety is high to begin with.

With that, let’s take a look at some numbers…

With North Korea’s border closing earlier this year, market prices quickly shot up as consumers most likely hoarded goods in anticipation of future shortages. Particularly curious was the fact that prices seemed to differ so widely between cities, as I wrote about here. This suggested that internal restrictions on movement between localities, a measure the state took to control the spread of coronavirus, were working. A few weeks later, however, both market prices and the differences between cities seemed to go down again.

Differences in rice prices, in percentage, between three North Korean cities, until March 7th. Data source: Daily NK.

So did market prices in general. In the latest price data observation from Daily NK, from March 7th, average rice prices are about 25 percent higher than a year ago, and 29 percent higher than in early December, before the border closure. That’ a lot, but somewhat less than the initial 36 percent increase when the border was closed initially. Even the slightly lower price increase would spell severe difficulties for many North Koreans in buying food. Note: the latest price observation is from March 7th, that is, several weeks ago.

Average rice prices in North Korea, until March 7th. Data source: Daily NK.

So, what happened here? There are two possibilities that I think are more likely and realistic than others. One is that markets overreacted in their initial anxiety. Put simply, people may have thought that supply would become much lower than it ended up being. This is a common mechanism in markets in general. People often react more strongly than called for to anticipated, future changes, and then adapt their economic behavior once it’s clearer what actual conditions of supply and demand are. It’s also possible that the government let up on conditions for imports and trade, easing the burden on supply.

But there is another possibility. Both Rimjingang and Chosun Ilbo have reported that the government has instituted price controls to prevent prices from rising. This was only to be expected, as it is one of the few tools the state has at its disposal to control market anxiety. Price controls, however, are rarely (if ever) effective in the long run in countries such as North Korea. Either trade moves to the black market, or sellers run out of goods as they are forced to sell for less than consumers are willing to pay.

Aside from the two aforementioned reports, there are other potential signs that price controls may be in place. The price difference between Hyesan and Pyongyang/Sinuiju went down to a conspicuously low level, one that is actually lower than normal, a very odd coincidence. It got there only over the span of a few weeks, getting close to the 5,000 won-level reported by Chosun as the price ceiling. As far as currently available information can tell, no conditions changed on the ground. It would be reasonable to assume that at some point, the government may let up on restrictions on trade to ease conditions, but we don’t know whether that has happened yet. Reports of harsh measures against smuggling continue, and such measures would signal to the markets that state enforcement of the border closure remains and will remain harsh. So while in theory it makes sense that prices would go down somewhat after the initial spike, conditions on the ground have not changed noticeably, as far as we know.

So, what might have happened is that at least around March 7th, the government was still somewhat successful at enforcing its price ceiling, at least in parts of the country. One of Chosun’s sources reports that as of March 18th, rice cost 6,300 won per kg in Hyesan, much closer to the initial price level after the border closure. Price ceilings can usually only be enforced for a limited period of time, particularly when real shortages loom of essential products. Prices either rise beyond the ceiling, goods run out, or a black market arises. If the regime is indeed enforcing a price ceiling, and it continues to do so for a long time, perhaps we will see an increase in back-alley markets and other type of economic activity that the government has been relatively successful at curbing by integrating the markets into the official economic system over the past decade and a half or so.

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North Korean government buys face masks via official smuggling channels

Friday, March 13th, 2020

By Benjamin Katzeff Silberstein

Smuggling exists more or less as an official, regularized trading method in North Korea, so this piece of news is perhaps not all that surprising. The government regards face masks as a strategically vital product, and it is only natural that it would import enough to make sure that at least the elite classes are covered if need be. Daily NK:

“The trade ministry [the Ministry of External Economic Relations] continues to import face masks from abroad,” a Daily NK source in North Korea said on Tuesday. “North Korean trading companies in China are managing the import of the masks following orders from above.”

In short, Daily NK sources have confirmed that the country’s trade ministry is focusing efforts on acquiring face masks and other “disease control supplies” from abroad.

STATE AGENCIES “TAKING THE LEAD”

North Korea’s state-run Korean Central Broadcasting Station reported on Feb. 22 that the Ministry of External Economic Relations along with the Ministry of Foreign Affairs is “taking the lead” in acquiring “prevention and diagnosis supplies.” The report also noted that the Committee for Cultural Relations with Foreign Countries – an outfit that organizes cultural exchanges with other countries – had recently imported 60,000 face masks.

“There are around 100,000 face masks, some 4,500 protective suits and other necessary drugs are imported into the country every ten days,” a source told Daily NK.

“Between midnight and 2 PM, there is a state-run agency that helps bring these items across the border,” he added.

North Korean state-run media continues to run stories saying that authorities are closely monitoring goods imported from abroad.

A Rodong Sinmun article on Monday, for example, stated that the country’s customs agency “stores imported cargos in tightly closed places for 10 days during which it rigidly inspects and sterilizes them according to the specification before handing them over to relevant units in compliance with the procedure and discipline laid down by the state.”

Despite these claims by state media, however, Daily NK sources have confirmed that smuggling of face masks and other items across the Sino-North Korean border continues to occur.

The state-run smuggling operations are also occurring following orders by North Korean Kim Jong Un that anyone engaged in smuggling will face punishment in military courts.

TO MEDICAL STAFF…AND THE ELITE

Items imported from abroad for disease control purposes are reportedly distributed to hospitals and high-ranking officials.

“Most of the items go directly to the medical [disease control] authorities,” one source said. “The rest goes to the leadership and their families.”

(Source: Mun Dong Hui, N. Korea is acquiring face masks via official smuggling operations, Daily NK, March 13, 2020.)

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