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World Food Program back to DPRK

Friday, May 12th, 2006

After a government-imposed shutdown of more than four months, the World Food Program announced Thursday that it would resume food aid to hungry North Koreans, but on a sharply reduced scale.

Tony Banbury, the U.N. agency’s regional director for Asia, said he signed an accord with the government in Pyongyang that will allow 10 staff members to operate a $102 million feeding program, helping 1.9 million of the neediest North Koreans over the next two years.

The accord, reached Wednesday after prolonged negotiations, ended the uncertainty that has prevailed since the DPRK government announced in August that it would accept development aid but no longer wanted food aid. That forced the World Food Program, which runs North Korea’s main feeding operation, to halt work at the end of December.

Banbury called the new agreement “an important breakthrough” for North Korea’s undernourished poor. But he said the number of people receiving food would drop considerably under restrictions laid down by North Korean officials — from 6 million in 163 counties under last year’s $200 million-plus program to 1.9 million in 30 counties under the new program.

“They explained this by saying they needed less food, that their crops were getting better and that they did not want to create a culture of dependency,” Banbury told reporters during a stop in Beijing.

Because Kim’s government is highly secretive, its assertion that more food aid was unnecessary could not be verified, Banbury said. But he expressed skepticism, noting that North Korea recently sought 500,000 tons of grain from South Korea and in recent years has consistently produced nearly 1 million tons less than its annual requirement of 5.3 million tons.

Economic reforms that began in 2002 have gradually loosened North Korea’s rigidly Stalinist system and injected some life into the economy, according to reports from Pyongyang. In particular, private food markets have been allowed in recent years, providing previously unheard-of choices for those with money. Food prices soared, however, prompting farmers to sell their crops in the private sector rather than to the public distribution system at controlled state prices. This in turn made life harder for the poorest among North Korea’s 23 million people, who rely on public rations.

In response, the government announced recently that the public distribution system would resume its monopoly on food grains. How this step ties in with the economic reforms was not explained. But Banbury said the agreement to resume U.N. food aid suggested that North Korean officials realized the public distribution system could not get food to everyone who needed it despite their earlier assertion that it was time to move on to development aid.

Production and distribution of U.N. food aid will resume immediately, he said, but it will take several weeks to get operations up to speed. As it was previously, most of the food aid will be in the form of vitamin-enriched biscuits for children, enriched porridge mixes for infants and supplements for pregnant women and the elderly.

Although the number of staff members has been shaved from 48 to 10, Banbury said U.N. officials would be able to verify that the food was going to the poor and not government officials or the military. Diversion of food has been a major concern of the United States and other U.N. donor countries since Kim proclaimed that soldiers and other officials have priority in North Korea.

“We will not be providing food to any areas of the country where our staff does not have full access,” Banbury said.

Posted in Agriculture, General markets (FMR: Farmers Market), Public Distribiution System (PDS), UN World Food Program | Comments Closed

Food aid update

Thursday, May 4th, 2006

From Yonhap:

A U.S. human rights organization on Thursday urged North Korea to allow international monitoring of food distribution, saying its recent policy changes on outside aid may cause renewed hunger among its people.

Recent decisions by Pyongyang to suspend the operations of the World Food Program in the country and revive the food rationing system may leave many in hunger, said Washington-based Human Rights Watch in a press conference in Seoul.

“North Korea has gone back to precisely the same place, when the famine began,” said Tom Malinowski, Washington advocacy director of the organization, referring to the mid 1990s in which two million North Koreans supposedly died of hunger.

North Korea adopted a series of policies last year that irked international human rights organizations. It asked the U.N. relief agency to end emergency food aid and its monitoring in September and then announced the reinstatement of the public distribution system, in which the government provides rationing of food and equipment to individuals.

Citing interviews with North Korean defectors and World Food Program officials, the rights watchdog said the food rationing system operates on a priority basis, feeding Workers’ Party members and military and police officers while leaving many ordinary people in hunger.

Despite its improved harvest in recent years, North Korea still suffers from a chronic food shortage, it said, with the country needing approximately 6 million tons of grain a year to provide basic nutrition for its 22 million people.

The North’s grain production hovers at 4.5 million tons and it receives 750,000 tons in aid from South Korea and China, but still falls short of demand, the organization said, citing statistics from the South Korean government.

It urged Seoul to strengthen the monitoring in the North to make sure the needy people get the food.

South Korea shouldn’t “simply passively accept that it is inevitable that North Korea cannot be influenced,” Malinowski said.

North Korea experts in Seoul, however, said the recent decisions by the communist country suggest it is making efforts to stand on its own rather than depend on emergency donations. And the revival of the public distribution system illustrates its improved food situation, they said.

“When the rationing system was reduced (in the late 1990s) it was because the government didn’t have food to distribute. Now that it has expanded the rationing system, it is in a better situation,” said Chon Hyun-joon, senior research fellow with the Korea Institute for National Unification, a public research body on North Korea in Seoul.

Posted in Public Distribiution System (PDS), UN World Food Program | Comments Closed

North Korean Food Rations Uncertain

Wednesday, April 26th, 2006

According to the Manilla Times and ABS/CBN Interactive:

North Korea could suspend food rations for ordinary citizens in Pyongyang next month due to its worsening famine, a South Korean aid group warned Sunday. The North Korean capital has had a better food supply than other areas despite a chronic food shortage since the 1990s.

“Pyongyang is no longer a safe zone in food supply,” Good Friends, a Seoul-based aid group for North Koreans, said in a newsletter. “Food supply officials in Pyongyang say food rations lasted only 10 days in April and will be suspended for ordinary citizens beginning in May,” the group said. The aid group said big businesses and state organizations would remain unaffected.

United Nations food aid to North Korea ended late last year after Pyongyang said it no longer needed emergency shipments from the World Food Program (WFP) and other international humanitarian agencies. The North Korean government said it instead wants development assistance and a smaller operation with fewer international staff whose monitoring activities would be restricted.

WFP has proposed a downsized aid plan to feed 1.9 million people, largely women and children vulnerable to malnutrition and disease. It used to feed 6.5 million people.

North Korea’s grain production rose 5.3 percent to 4.54 million tons last year, still far short of its annual demand of six million tons, South Korea’s unification ministry report says.

According to the Daily NK:

North Korean sources have claimed that since April only some areas of Pyongyang have gotten food rations, and local areas were already cut off. North Korea recently relaunched rationing on the Workers’ Party Foundation Day (10/10/2005), yet from the beginning, the program did not meet its objectives, and furthermore, from this spring even Pyongyang is seeing a shortage of food.

Mr. Kim, who is a North Korean trader and now stays in Dandong, China said, “Officials working at the central agencies (the Party, Ministries, Court) in Pyongyang have gotten rations, but workers in general factories and small companies in local cities have to resolve their April and June food prooblmes themselves.”

Mr. Kim stated, “Despite a severe shortage of food, some wealthy, powerful people are persisting well. Yet other people who rely on the food rationing of factories mainly go to local areas to exchange goods for food.” It led to a situation where North Koreans have to withstand starvation by all means, before new potatoes come out.

At the same time, price of rice at the Jangmadang 9farmers markets) began rising.

Rice prices at the Shinuiju Jangmadang are:

1,000W ($0.33) to 1,200W($0.4) per 1kg
Yongcheon rice is 1,200W 1kg
Chinese rice is 900W($0.3) to 930W($0.31) per 1kg

Corn is 300W($0.1) to 400W($0.133).

Shinuiju rice is a little more expensive than that of other cities, and its wheat flour is cheaper. It is because rice comes in from other cities, and Chinese wheat flour is distributed to each city via Shinuiju.

Mr. Lee hinted that travel permits to China are issued “conditionally.” That is, after visitors to China come back to North Korea, they have to offer some food to the National Security Agency, and people with no relatives have a harder time getting passes.

Mr. Lee said, “As for me, it is better because I found my older brother. However, other people living in our village go out to rivers to dig for gold and to mountains to dig for edible plants.”

March and April, called the ‘Barley Period (Borigogae)’ are the months when food crunches are most severe. This is when the crops and edible plants (side dishes) harvested last year begin to run out. When edible plants run out, North Koreans prolong their lives by eating grass or wild plants. However, because of death by starvation in the mid 90’s, which resulted in massive foraging, even wild plants like bracken are not easily found now.

Posted in Agriculture, Public Distribiution System (PDS), UN World Food Program | Comments Closed

North Korean Grain production up 5.3% in 2005

Wednesday, January 25th, 2006

According to Financial Express:

North Korea’s grain production rose 5.3 per cent to 4.54 million tonnes in 2005, helped by better harvests and fertilizer shipments from South Korea, South Korean data showed today.

The 2005 harvest was still far short of the impoverished country’s annual demand, estimated at six million tonnes, South Korea’s unification ministry said in a report. North Korea received 500,000 tonnes of rice from South Korea last year, together with humanitarian food aid from the World Food Programme (WFP) and other international agencies.

UN’s food aid to North Korea, however, ended on December 31 after Pyongyang said it no longer needed emergency shipments from international agencies. Instead, Pyongyang called for long-term development assistance to end its chronic food shortages. But some experts regard the shift to development-oriented assistance as a tactic to dodge the WFP’s request for transparency in food distribution.

Posted in Agriculture, Foreign direct investment, Public Distribiution System (PDS), UN World Food Program | Comments Closed

what is stopping DPRK reform?

Wednesday, January 18th, 2006

According to Han Young Jin, Reporter, Defector from Pyongyang
in the Daily NK:

Interview 1:
Kang Min Jun (pseudonym, age 65), a former executive of “Keumgang Jewelry Processing Co.”, a North Korea-China state cooperative factory asserted that Kim Jong Il’s visit to China is a mere gesture.

“I participated in the National Economic Sector Officials Seminar held in Pyongyang, and it was before the 2002 7.1 Economic Measure was announced. The central party officials who came to educate us said, “Reformation and liberalization does not fit into our revolution reality so do not expect it to happen.” Unless the North Korean regimes changes, reformation and liberalization will remain as a dream,” Kang said.

“After his 2001 visit to China, Kim Jong Il praised China’s changes calling it, “heaven and earth reversed” and called on three hundred professors and experts from Pyongyang People’s Economy University and Wonsan Economics University and made them visit China and study economics. They came back and during their discussion for reformation, their study was abandoned due to the four principles the Party insisted never to be violated.”

The four principles Kang presented are as the following.
1. Planned economy must never be abandoned.
2. Private ownership by the people cannot be permitted.
3. Liberalization of individual economy must not be allowed.
4. The Public Distribution System (food distribution system) must not be abandoned.

Interview 2:
“Whenever he is in trouble, Kim Jong Il makes an event. Right now, Kim Jong Il is in a deep trouble. Nuclear issue, counterfeit issue, Banco Delta Asia fund freeze, human rights issue, food issue and all the problems are now come together. The only way to solve these problems is siding with China. If North Korea is determined to reform, it could be have just made foreign investment attraction policy instead of making a trip all the way to China.”

Posted in Economic reform, Foreign direct investment, Private property, Public Distribiution System (PDS), UN World Food Program | Comments Closed

Let’s Reform and Liberalize, Please!

Friday, January 13th, 2006

Daily NK
Kim Young Jin
1/13/2006

The North Korean people feel they have reached a limit in enduring daily hardships.

The North Korean defectors recently found in China all say, “There is no other way to live unless (North Korea) opens up.” They are “tired of living.”

Last October, the North Korean state officially announced a restart of the food distribution system. It requested the halt of food aid from the WFP and demanded for a withdrawal of international rescue NGOs in Pyongyang.

However, the North Koreans who escaped to China testify that the empty promise for the good distribution system was never fulfilled.

Hur Chul Min who defected from Musan said, “They said they will distribute food starting in October, but all I got was 9 kg of corn in November.” Hur, who was a miner, must have received 900g of corn per day, which makes 27kg a month according to regulations. However, he received enough for only ten days.

The North Korean state last year put out a slogan saying, “Farming Prioritization” and the same slogan prevails this year. Hur says the only reason why the state returned the food distribution system is to earn loyalty from the people. The North Korean people already know all about it.

The following is the interview with Hur in full text.

– How is the situation of food distribution for Musan Mine this year?

On the October 10 holiday, they gave all the companies an order to make food cards. They said because farming this year was successful, they will give us food. They gave us food for ten days in November, but after that, they kept telling us to wait because there is not enough of food at the distribution centers. Those who started working again because the state promised food distribution, started to talk again, that they will only get “word distribution.”

– What do you mean by “Word distribution”?

It means they only give us words instead of food. People were deceived so many times that they no longer believe in the government promises.

– Did the government control of the people intensify?

The National Security Office orders the people to go to work. The people’s committee conducts family counts and reports the people who do not work. It is better to disappear from home. If you don’t come to work for two days, the mine patrol come to your home to take you. Even when you eat gruel, they demand you to work.

– How long did you work at Musan Mine?

I worked for 18 years. There was a lack in the workforce, so when I graduated middle school, I was “levied” to the mine by the state. None of my peers could go to the military. Starting in 1994, we did not receive any wages. Until 1997, we lived on grass. Starting in 1998, people started to sell things, and found ways to survive.

– Is it true that the farming last year was a success?

I do not know because I worked in a mine. After they ordered the “farming prioritization” policy, people were not allowed to stay jobless. Those who were selling things were forced to work. The road patrol caught those who hitchhiked to do their business. Those without travel permits were taken to the farms to pull out weeds.

– Did the situation improve after the 7.1 Economic Management Measure?

Immediately after the government implemented the 7.1 Economic Management Measure in 2002, the wages increased instantly. At the time my status was a level 4 technician, so I received 2,500 Won ($1.25) a month. Those who had level 6 status received 4,500 Won ($2.25). It made everyone happy at first. However, in less than two months, the price of goods increased more than 50 times.

Rice that used to cost 70 Won ($0.035) per kilo was now 1,200 Won ($0.6) per kilo. Meat enough for a meal cost more than 2,000 Won ($1). Wages were not given on time. They told us to consider the wages not given to have been saved, and gave us a ticket. They said, once the production takes place, they will give us the accumulated wages. But we never received them. Actually, after taking out support fees for the People’s Army and health insurance fees, there isn’t much left anyway. If you don’t have your own business, you will die.

– Have you ever received rice from South Korea?

I saw rice sacks that had “Republic of Korea” printed come into the Chongjin Port. However, for us, they are only cakes in pictures. They took all of them to the military in three days. On a day like that, you have so much rice in the market. The price of rice drops dramatically and those who can afford it buy a lot of rice to store. Their intention is to sell it when the price increases.

Now the people know why they are so poor. Whenever people gather, they openly say they want reformation and liberalization to take place at last.

Posted in 2002 Economic reforms, Agriculture, Civil society, DPRK Policies, Labor conditions/wages, Mining/Minerals, Public Distribiution System (PDS) | Comments Closed

Price information

Saturday, December 31st, 2005

Here is more commodity price information courtesy of Open Radio for North Korea:

Agricultural and houselhold commodities:
1) Rice
-Shin Eui Joo: The price rose from 850 won/kg (18th) to 900won/kg (31st)/ whole sale price: 620won/kg
-Bak Chun Gun: October: 1000won/kg, November 800won/kg (trading rice was banned in October with resumption of food distribution system, which caused the rising price.)
-Pyeongyang: Honammi 800won/kg Annammi 680won/kg

2) Corn
-Shin Eui Joo: 400won/kg (December)
-Bak Chun Gun: 350won/kg (November)

3) Pork
-Shin Eui Joo: 3,300won/kg (December)
-Bak Chun Gun: 3,500won/kg (November)

4) Beef: 7,000won/kg (Beef is seldom sold at markets, but was temporarily out in the black market for new year’s holiday season.)

5) Cooking Oil
-Shin Eui Joo: 2,300 won/kg (November)/Yellow Oil
-Bak Chun Gun: 2,500won/kg (November)/Yellow Oil

6) Seasoning
-Same in the region of Shin Eui Joo, Sah Ree Won, Bak Chun Gun: 2000won/bag(200g)

7) Underwear
-Bak Chun Gun: Brassiere: 4,000~6,000won, Children’s underwear: 5,000~6,000won
-Shin Eui Joo : Underclothes: 10,000~15,000won/piece, 20,000~30,000won/set

8) Socks
-Bak Chun Gun: 500~2,000won/pair (socks for winter)

9) Shoes
– Bak Chun Gun: high quality: 15,000won, poor quality: 3,000~4,000won/ Handmade: 2,500won

10) T.V
-Shin Eui Joo: the same as November

11) Price of house and rent
-Shin Eui Joo: One storied house (1 Room, 1 Kitchen): $600, Apartment (2 Rooms, 1 Kitchen): $1,500, Well-located apartment (3 Rooms, 1 Kitchen): $10,000~15,000(able to bargain), 100 Sq.m- apartment: $12,500 (90,000~100,000 Chinese Yuan)
-Sa Ree Won: 100 Sq.m apartment $8,750 (70,000 Chinese Yuan)
-Bak Chun Gun: One storied house (2 Rooms, 1 Kitchen): around $100, Three storied apartment: around $150~200

Footnotes:
1. A middleman receives 10% of the purchase as compensation. If one moves to a purchased house, one needs to receive a certificate which records that you are allowed to live in the house from a police officer in charge of registration in the neighborhood, usually the payment is one mal(10du/15kg) of rice.
2. Expense for making Kimchi(Bak Chun Gun): Chinese cabbage 200won/head, Red pepper powder 2500won/kg, garlic 3,000won/100heads, ginger 300won/kg, salt 350won/kg, sugar 1,000won/kg, salted anchovies 1,500won/kg, scallion is raised at home. Approximately 40,000~45,000won is expended for making 150 heads of Kimchi (usually consumed with rice, and is made with pepper, scallion and salted anchovies), for family of four.

Local Fees and Markets:
1) Electricity- Bak Chun Gun: 10won/lightbulb, 70won for black and white TV (per quarter)

2) Water- Bak Chun Gun: flat rate of 200won per house (per quarter)

3) Tax on land – Bak Chun Gun: 200won/2.5 Sq.m (per month)

4) Payment for spot at markets (Bak Chun Gun)

5) Exchange rate for Renminbi and US dollar
Shin Eui Joo: 2,900won/$ (November 1: 2,715)/ Rinminbi 360won/yuan (November 1:320)/ 3600won/Euro

Footnotes:
1. No payment at markets, but general tax is imposed. 20won/day for agricultural products, and tax for industrial products vary according to the goods.
2. Spots in Markets are rarely traded. For people starting their business at the market, relationship with the manager is important. When business with the manager was successful, managers make a spot for them by making others’ spots smaller.

Health Care and clothing:
1) Medicine for cold and antibiotics (Bak Chun Gun)
-Medicine for cold: Chung Yeong Poong 10won/pill (Adults consume 2 pills)/ Antibiotics: Penicillin 100won per ampoule/ Distilled water: 30won
-Antibiotics: when one receives an injection of 1 ampoule of Penicillin mixed with distilled water, the doctor is paid 100won aside from the price of medicine.

2) Bribe paid for medical examination and basic treatment (Bak Chun Gun)
-5000won for releasing a medical certificate, 350won for 1 injection (ex, glucose 500g), 100won for Penicillin

3) Stationaries (Bak Chun Gun)
-Won Joo Pil( Ball Pen): 250won, Notebook (paper made of straw): 5won/20pieces, Hand-made bag in North Korea, 2,000~3,000won, Uniforms used to be purchased at a flat rate set by the government with a coupon, but uniform is seldom sold at a shop these days. People usually purchase fabrics of appropriate color and size, and hand made the uniforms. (official state rate for elementary school uniform used to be 1,500won)

Monthly tuition and expense (Bak Chun Gun) :
-No monthly tuition is officially required, but some parents give some money to the teachers privately and school requires the students to prepare various materials.
– Club activity: the students need to pay 5,000won every month. (If one participates in cell activity, he/she is exempted from external labor or social labor ).
– Monthly payment is 10 bundles of firewood/Iron 3kg/Vinyl 1kg/Rubber 1kg
– -Students who fail to bring the materials are returned home without being allowed into the class.

Electricity:
-Shin Eui Joo: same as November
-Bak Chun Gun: Electricity was provided throughtout all day despite frequent blackouts occurred in the summer. / Since the beginning of the winter, electricity was provided only between 10:30pm~ 4am due to poor supply. (Mostly, candles are used at night. Candles are 40won each).
– Pyeongyang: electricity is provided for 24 hours, but blackouts occur often. Sometimes, 3~4 hours of blackout occur.

Water Supply:
-In case of Bak Chun Gun downtown, water pipes freeze in the winter. People dig wells for water.
-In case of Pyongyang, peripheral area is provided with water only once or twice a week. (The time when water is supplied is not announced beforehand. People have to watch the faucet on all the time).

Railway system and transportation fee:
-The fare for train from Bak Chun~ Won San with a transfer at Gaema Highland (Where Pyong Buk Sun and Gang Won Sun meets) is 35won, but most of the officials at the station hide the tickets and sell them for 1,000won.
-In order to buy train tickets, one needs to make a reservation a day ahead and stand in line to buy the ticket on the day. However, honored soldiers, soldiers on service and school teachers have priority, and it is hard for common people to buy tickets.
-What is interesting is that a lot of people take the train without paying the fare when moving from Bak Chun Gun to Ahn Joo Gun by Shin Eui Joo-Gae Sung train. It is because no body checks the tickets in this block.

Cars, buses and car fare between major cities:
-Pyongyang: same fare of 5won for subway, train without track
-Bus between Bak Chun ~ Shin Eui Joo runs once a day, and the fare is 2,500~2,800won. Additional 1,000won needs to be paid for one luggage.
-Shin Eui Joo~Nampo/ Roundtrip, once a day, 10,000won
-Shin Eui Joo~Won San/ Roundtrip, once a day/ 12,000won (10,000won possible after bargaining)
-Shin Eui Joo~Sa Ree Won/ Roundtrip, once a day/ 12,000won (10,000won possible after bargaining)
Footnote: No departure time is designated. The train leaves when the train is full.

Lodging:
-Shin Eui Joo: Same as before. Some of the private inns are as well organized as hotel. Chinese Koreans usually use them, and it costs 5,000won per night.
-Bak Chun Gun: State owned inns lacked heating system and was filled with lice, which is why they rarely exist now. Individuals run lodging facilities now (similar to lodging at a private residence)/ they come out to the station in order to invite guests, and it costs 100won per night.

Expense for obtaining travel document:
-Travel document: it costs 10,000won to travel from Bak Chun to Pyeongyang (ten box of cigarettes branded “Cat”)/ if using other ways, 6,000won~8,000won (Jagangdo 7,000won/Chungjin 8,000won/Pyeongsung 6,000won)/ 500won from Bakchun to Shin Eui Joo (Within a province)
-Travel document is not supposed to cost any money, but Municipal adminisrative committee, county administrative committee and officials in charge of the process publicly asks for money/ Only expense for travel documents to Pyongyang is flat rate of 10,000won, and expense for other provinces differ by person.
-Travel document to cross the river: Valid for one month, and cannot be extended/ costs around $100~200, which is not much more than passport or visa. (more money paid, the document is more quickly issued)/ Fee for travel document to cross the river is set for 20,000won by the government.
-When Chinese citizen visited North Korea with the document, extension is only available with a cost of $100 a day. (When one has good relationship with people of National Security Agency or any other relevant organizations, he/she can pay $50 a day) Because of the fee, they rarely extend the document.
-Passport and visa: DPRK passport is valid for 2 months and Chinese visa is valid for 90 days (In North Korea, expiration date on DPRK passport is more important than that on Chinese visa)/ Extension can be made twice, but extension is rarely requested by anyone (Specific reason for extension needs to be provided, which is a lot of work)/ Also, certificate of health is only valid for 4 months, which means that the passport cannot be extended twice/ fee for issuance of passport is set by the government for 40,000won (Some people say 150,000won). But actual expense is $100~500, and the expense varies depending on the region, person (interpersonal skills, ability, relationship with others) and the waiting time to get the passport (1 month~1year)/ Passport is issued in 1~2 months with a payment of $500 for Pyongyang, and 2~3months with a payment of $300 for other regions. / DPRK passport is valid for 2 months, but it is actually issued 1 month after the issue date.
-When visiting China to visit relatives, applicants for passport and travel document to cross the river are classified separately. In case of crossing Yalu River, if the applicant intends to stay in Dandong Province (Dandong, Bongsung, Donggang, Gwanjun) they need to apply for travel document, and if they intends to go farther than Dandong Province and for example, visit relatives in Shenyang and Fushun, they need to apply for passport.
-A case of procedure to obtain travel documents to cross the river and visa (with purpose of visiting the relatives)
-Application and procedure -> Mid March, Fill out the application (Hand $200 to officials at the office of foreign works: Confirmation of the relatives at the office of foreign works, military security office, and military police office, confirmation by a chair of women’s committee, Approval from Provincial Police Office and National Security Agency) -> Issuance of travel documents to cross the river in the beginning of November -> Two-day education in the beginning of November (First day: Exhibition on battle against espionage/ Second day: special education by the deputy of military security offic / Lastly, write out the oath) -> entered China on 23 November

Price of a business spot at the market (Bak Chun Gun)
-In case of the market at Bak Chung Eup, they don’t have the price of business spots.

Food Distribution System
-Bak Chun Gun: Distribution was carried out twice in the beginning and the end of October/ Distribution was halted in November/ The amount distributed was 15kg and did not meet the assigned amount of 57kg/ Official amount: 700g for workers, 300g for housewives, 500g for 15 year old child, 400g for 13 year old child/ rice/other crops ratio is 3:7
-Pyongyang: Food distribution was not halted except for the three months period of April~June 2005./ The amount distributed is 485g(official: 700g) for workers, 300g for housewives, 200g for students (official amount 300~500g)/ ratio of rice and other crops was 5:5. The ratio was sometimes 7:3 when things are better than the usual/ The price was 36won for Annammi, 54won for Honam rice (received from South Korea)/ Price at Yangjungso(Place where rice is gathered) was 20won less than market price/ Everyone is supposed to purchase rice from Yangjungso, but because of poor quality of rice, some well-off people buy rice at market.
-Shin Eui Joo and Sa Ree Won is similar to Bak Chun Gun.

Events, accidents, things to pay attention to

1) Penalty for listening to foreign broadcasting or watching illegal recordings
Case1> There was a public trial and punishment in July~August 2004 for 5 people for watching illegal recordings at a conference room of Gun Management Committee of Bak Chun Gun, located in downtown. / The penalty was expulsion of the family of the involved party to the mountains.
Case 2> A person who sold and showed VCD in Pyongyang in November 2005 was arrested. During investigation, the person committed suicide using a string on his bag while the investigator was absent. Reason for the suicide was not to harm the rest of his/her family/In Pyongyang as well, when one gets caught while watching illegal recordings, the penalty is usually an expulsion.

2) Wire telephone and charge for phone calls
– Installation of wire telephone: $200 at Sa Ree Won and Bak Chun Eup, $300 at Shin Eui Joo for obtaining a phone number as well/ customer needs to purchase the wire separately
-User of private wire telephone: There are relatively a lot of users of private wire telephone at Bak Chun Eup because there are a lot of Returnees from Japan and traders. Among 120 households, there are 11 households with telephone./ When somebody want to use wire telephone in a neighborhood, around 500won is paid.
-Common people use telegram for communication. 10won is charged for one page, and .5won is charged for each additional word.

3) Others
-Bak Chun Gun: There was a rumor that private cultivation would be allowed starting from this year, but instead of private cultivation, a group farming was adopted. Each group pay the assigned amount to the government, and the rest was left for the individuals to take care of. However, the groups needed to take care of fertilizer and pesticides which caused decline of the yield/ Phrase including “Communism” is gradually decreasing (example, “Communist Ethics” was replaced with “Socialist Ethics” in textbooks for elementary, middle and high school. “Rice is Communism” was replaced with “Rice is Socialism” as well/General atmosphere is that people do not believe what government and the party says.

-Pyongyang: Broadcasting criticized the resolution on situation of human rights in DPRK at the UN, but it is heard that the criticism has caused side effects/ Many of the people think that the resolution must have been adopted because there is a problem of human rights in DPRK/People in Pyongyang are known to be unhappy with Kim’s regime but have no way to change it. So they try to be patient and endure.

Posted in Agriculture, China, Communications, Emigration, Energy, General markets (FMR: Farmers Market), Hoteling, Price liberalization, Public Distribiution System (PDS), Transportation, UN World Food Program | Comments Closed

Interview with a Citizen of Chongjin City

Wednesday, December 28th, 2005

Daily NK
Kim Young Jin
12/28/2005

The DailyNK has reported North Korean news vividly with the help of the voices inside North Korea during the year 2005.

North Korea expressed farming as ‘the major front line for the construction of socialist economy’ in the joint new year editorial at the beginning of this year. In fact, it has made every effort to relieve its famine by mobilizing a number of people to farming for the entire year. In October, it also announced to its people that it would resume its ration system that had long been stopped.

The DailyNK met a citizen of Chongjin City of North Hamkyeong Province to fully grasp the recent situation of North Korea as a whole at this moment of seeing the old year out and the new year in. The interview is presented in the format of 10 questions and answers. The reader is expected to feel the reality of North Korea in mid-December, 2005 by reading the interview.

1. How does the ration system work?
Workers in Giupso (State Owned Enterprise) receive a ration twice a month, the total ration being 700g a month. The government designated that the price of unglutinous rice is 46 won, while that of corn is 28 won. Those housewives who can work but stay home can buy 300g for 620 won. Children and the elderly, who are not able to work, can buy cereals at the government designated prices.

In short, the government has adopted a double price system. However, those who are rationed receive rice mixed with miscellaneous cereals whereas those who pay 620 won get unmixed rice.

Factories and Giupsos are assigned the farmland of No.112, and they have to produce cereals the quantity of which is equal to two month’s ration. In October, people were fully rationed, but since November, they have not been able to be fully rationed. People without the farmland of No.112 partly received their rations.

Additional question: What is the farmland of No.112?

It is a part of a cooperative farmland which is difficult to cultivate. Every factory and Giupso is assigned one. If a Giupso is influential, it is usually assigned a fertile land. It is so named because the policy was established on either November 2nd, last year or January 12th this year. I don’t remember the date.

2. How do people obtain their food if they are not fully rationed?
They get cereals in black markets. Transferring cereals in large scale is strictly prohibited, but people are selling them to acquaintances or under the cover of a bribe. Trading a large quantity of cereals is stealthily accomplished in a private home. Restaurants are also forbidden to sell processed cereals.

The price of rice has not risen. It ranges from 800 to 820 won ($0.4-0.41). The price of corn is 300 won ($0.15) while that of potatoes is 150 won ($0.075). Because people in Chongjin City do not enjoy eating corn, it is cheap here.

3. How are farmers rationed, and how much is the government’s purchasing price of cereals?
The farmland of No.112 is divided by fertility. The worst class is the 12th. 1,500 won ($0.75) is collected from 9,917.4 square meters of 12th class farmland as a tax. It can be payed with corn. 1kg of corn is bought for 24 won($0.012).

I heard a squad leader of a cooperative farm located near Chongjin say, “Every person on my farm was supposed to receive the prize of some 17,000 won ($8.5) because the government sent the prize to the farm for good farming, but the farm has not given the prize out to the people, saying that it would be a better idea for the money to be used to buy trucks and farm equipment, and thus people are full of complaints. The farm distributes ordinary rations to the workers.

4. What are people’s reactions to the resumption of the ration system like?
Most people are pessimistic about it. They grumble, “We do not understand why the government does not sell cereals indiscriminately. It has just made things complicated.” On the other hand, those who do not have a means of making a living hope for the ration system.

5. Do you have something to talk about regarding companies and work place lives?
In former years, there were people belonging to the circle called ‘the rest’ in companies. These people could do their own business by giving some part of their profits to their Giupso. However, all people are required to come to the Giupso to work these days. If there are some surplus workers, they are fired.

Since it was said that every Giupso should ration its workers, those who are not able to do their own businesses, especially women, have made every effort to be employed by a Giupso.

Rich people are not interested in companies, but the poor are full of complaints because ‘the rest’ circle was eliminated. The poor are getting much more interested in job opportunities.

6. As far as I know, the rate of factory operation is 20% or so. Has there been any changes recently?
No, there is almost no change in the rate. Earning foreign money is active, but I’ve never heard that those factories that had stopped before resumed its operation, or that they changed their business category to be operative.

7. Can you come up with a concrete example that shows that the status of partisans is getting lower?
Factories and Giupsos are reluctant to employ partisans because it is difficult to lay them off. If one says he is a partisan during a job interview, he will probably be turned down. Non-partisans are definitely preferred.

8. Is the control over people getting tighter?
The control in matters of food is getting tight. Because controlling restaurants and processed cereals has been getting tighter, more and more stalls are being emptied in markets, and the price of stalls is decreasing. A stall 50cm wide and 1.5m long for selling apparel can be bought for 120,000 won ($60).

Food for a family of 4 members costs 120-130 thousand won ($60-65) a month. The family also has to spend money for housing and clothing.

Additional question: I heard that even though many people are moving from one place to another, and a number of people dare to complain, punishments are getting weaker and weaker. Can you give me some examples regarding that?

The security agents say that they no longer arrest blasphemers. They even say that they will enforce laws on the basis of scientific evidences. (Blasphemers refer to those who blaspheme the system of the Kim Il Sung or Kim Jong Il regime.)

Punishments for defectors, radio listeners, and other such crimes are considerably moderated.

A neighbor in his 70’s was arrested due to his acquaintance’ betrayal. He revealed that he had been listening to the radio, but he was just called names during the investigation and criticized publicly in front of a crowd of people. That was the punishment. Even though blaspheming is said to be forgiven, you cannot call Kim Jong Il’s name. Maybe it would be okay for you to say South Korea is rich.

Additional question: Recently, it has been reported that Kim Jong Il ordered that torturing be checked and human rights be respected. Have you ever heard from security agents such a story or instructions?

No, I’ve never heard that.

Additional questions: Because punishments are getting moderated, what kind of countermeasures do North Korea take to protect the regime?

The National Security Agency is said to employ and use many informants. It lets people watch each other. According to one of my acquaintances, those who have an experience of escaping from the North are especially encouraged to watch each other.

9. How is the electric power supply like?
Electric power is supplied for 3 to 4 hours a day from 11 p.m. to 3 a.m. Middle class people usually have both a black and white TV set and a color TV set. They use only batteries for the black and white TV. Electric power supply is poor for winter. It starts getting better in the spring and is best in summer.

10. Recently, North Koreans are said to widely use horse-drawn or cow-drawn carriages. Is that true?
They are widely used for carrying cargo. They are seen even in urban cities. Recently, individuals or Giupsos are trading cows. The price of a cow in black markets range from 400 to 700 thousand won ($200-350). Recently, the price for using such a carriage is determined in relation to the distance instead of the weight it should carry. 3 to 4km costs 2,000 won ($1), while anything more than 5km costs 3,000 won ($1.5). The weight of the cargo usually does not exceed 700kg.

If one uses a truck, he must pay for the fuel in addition to the fee. 1kg of diesel costs 2,000 won ($1).

Posted in Agriculture, Black markets, Civil society, Economic reform, Electricity, Energy, Labor conditions/wages, Ministry of State Security (MPSS, NSA, SSD), Price liberalization, Public Distribiution System (PDS), Restaurants, Transportation | Comments Closed

Banking steps towards the real world

Monday, December 12th, 2005

FDI Magazine
Stephen Timewell
12/12/2005

On my journey to Pyongyang a Beijing receptionist remarked that the Democratic People’s Republic of Korea (DPRK) is very much like China was 25 years ago. And as the motorcade of China’s president Hu Jintao passed thousands of flower-waving North Koreans on his visit to the world’s most secretive and politically isolated country at the end of October, he may well have agreed.

Visiting Pyongyang is like going back decades in a time machine, to a land with no advertising, no Nokia, Microsoft or McDonald’s billboards and almost no cars. Impressive grand avenues and massive public monuments dominate the landscape but there is no new construction or shops.

The streets are scrubbed clean by hand and are full of hundreds of orderly people wearing their ‘Great Leader’ badges and walking everywhere. Curiously, bicycles are discouraged because of bad accidents and the government encourages power walking for good health, or so I am told. In a country said to spend 30% of its GDP on defence, there is no visual military presence (or overt police presence) in the capital at all.

The ‘traffic ladies’ standing at major intersections are a welcome replacement for traffic lights but there are precious few cars to direct.

Questions greatly outnumber answers in this capital where visitors are duly dazzled by the spectacular grand mass gymnastics and artistic performance (called Arirang) by almost 70,000 children in the massive 150,000-seat May Day Stadium. But visitors are also aware of serious food shortages and cannot ignore the capital’s tallest building, a magnificent 105-floor pyramid tower with a crane on top, left unfinished many years ago, I was informed, due to financial problems.

Winds of change

Whether the DPRK is seen as the last Stalinist communist state or as a Confucian nationalist monarchy or even, as it describes itself, as a “powerful socialist nation”, visitors can feel the winds of change, particularly on the economic front. For more than 50 years the iconic stature of the late ‘Great Leader’ Kim Il Sung and that of his successor son Kim Jong Il have dominated the political landscape; the question going forward is how the country’s dire economic circumstances can be improved and whether the regime has the capability to create the new structures needed.

Pyongyang was playing host not only to Mr Hu but also to an increasing number of foreign delegations and journalists, all keen to understand the trends taking place in probably the last country to have massive pictures of Marx and Lenin hanging outside its Ministry of Trade. For many, however, the current focus is progress in the Six-Party Talks on the nuclear weapons programmes of the DPRK.

In the fourth round of talks in September between the two Koreas, China, Japan, Russia and the US a landmark agreement appeared to have been reached. “All six parties emphasised that to realise the inspectable non-nuclearisation of the Korean Peninsula is the target of the Six-Party Talks,” a joint statement said. “The DPRK promised to drop all nuclear weapons and current nuclear programmes and to get back to the non-proliferation treaty as soon as possible and to accept inspections from the International Atomic Energy Agency.”

At the time of going to press in November a fifth round of talks was expected to move a final agreement closer but detailed negotiations over implementation of the above agreement were not expected to be easy or to be concluded quickly. The DPRK, unsurprisingly, wants some payback, be it light-water reactors from the US or other economic incentives.

The core issue is that the DPRK’s publicly acknowledged plutonium programme, believed to provide enough radioactive material for about six bombs, is probably also the country’s key card in trying to rebuild the economy. Kim Jong Il needs to gain maximum advantage from giving up his nuclear threat, but even then, what does his economy have to offer?

Information hollow

For a financial journalist the DPRK represents a serious challenge. Understanding the economy and the banking sector of a country is never easy, but when no data is published by the government or the central bank it becomes significantly more difficult. I knew information was scarce but believed that the two very agreeable government minders, assigned to monitor my every move in my four-day visit, would be able to help me extract a simple list of banks operating in the country. No such luck. Although my visit was welcomed, the central bank (which acts as both the issuing bank and as a fully operational commercial bank in the traditional socialist model) failed to provide the list (or anything else), despite numerous requests.

Although the consensus after several interviews was that around 20 banks of various types exist, I can only vouch for the handful listed here. Clearly the Foreign Trade Bank (FTB) represents a pivotal bank in the financial system and Ko Chol Man, director of the FTB, was keen to explain the peculiarities of the DPRK banking system. “The domestic and foreign exchange settlement systems are completely separate. The central bank deals with the domestic market and money issuance and it also has a commercial banking role; the FTB has complete control over foreign exchange matters and trade and also holds the country’s foreign exchange reserves.”

Unlike other banking systems, the FTB in the DPRK acts as a clearing house for the foreign exchange activities of the banks in the country. It does not report to the central bank but, like all banks, reports to the State Fiscal and Financial Committee (SFFC), the overall banking regulator.

Mr Ko was pleased to note that the FTB had around 500 correspondent banks worldwide and, along with its 600 staff (including 11 branches) in North Korea, had six representative offices outside the country (including offices in Austria, Russia and China) and planned to establish a UK representative office in London. However, when asked for details of FTB’s banking activities he replied bluntly that no banking institution had published its figures in terms of activities or balance sheet. “We cannot give figures about the size of our assets because it is a regulation of the state. If the situation becomes better we can make them public but up to now it is impossible.”

Economic estimates

Despite the absence of official economic and banking data, various estimates help make the picture a little less murky. A recent Standard Chartered Bank report places North Korea’s nominal GDP at the end of 2004 at $22bn or $957 in GDP per capita terms for the country’s 23 million population; by comparison, South Korea’s nominal GDP is put at $680bn or $14,167 per capita for its 48 million population. While the unification of the two Koreas is seen as an important political objective, especially in Pyongyang, the startling economic gap between the two states could mean that the North becomes a huge burden on the South, and Seoul well recognises the economic problems that emerged from the reunification of Germany in the 1990s.

Meanwhile, Jong Msong Pil, of the Institute of Economy at the Academy of Social Science, explained how the economy had declined dramatically from a GDP per capita of $2500 in the mid-1980s to $480 per capita in 2000.

“The big drop was caused by the disappearance of the socialist market worldwide in the early 1990s; the collapse of our socialist barter trade system led to the failure of many enterprises and a decline in living standards,” he said.

Dr Jong noted that, following the hard times of the mid-1990s, the first target of the national economy has been self-reliance. He added that no economic data had been published since 2000. He believed, however, that 10% economic growth occurred in 2004 and, responding to reports from the World Food Programme (WFP) that a third of the population were malnourished, he said the food situation was improving. “In our country, all people have a job so for this reason no one has died of starvation or hunger. Our country is a socialist planned economy so the government takes care of people’s living.”

Acknowledging shortages in the past, Dr Jong said that in October the government had normalised the public food distribution system, which indicated the government was now supplying sufficient food.

Is the DPRK’s food crisis over? Driving around Pyongyang’s spacious avenues (with two minders) there was no visual evidence of malnutrition – but the capital is likely to be much better served than elsewhere. A supermarket was shown but the goods were only available for foreign currency, hardly food for the masses. Cha Yong Sik, deputy director general at the Ministry of Foreign Trade, said the government had not imported food on a commercial basis in 2005, unlike previous years, but neighbouring countries are still providing significant food aid. Richard Ragan, country director of the WFP, said food production in 2005 was up 10%, with cereals up 6.6%. But while the food situation may have improved, the DPRK is said to be still dependent on food aid.

Trade predictions

So what are the DPRK’s prospects? Much depends on the outcome of the nuclear negotiations but estimates from the Seoul-based Korea Trade-Investment Promotion Agency (KOTRA) say the DPRK’s trade volume in 2005 is expected to pass $3bn for the first time since the fall of the Soviet Union with the figure likely to reach $4bn if inter-Korean trade is included. Trade with China, the DPRK’s largest trading partner, grew by more than 40% in the first half of 2005, indicating Pyongyang’s growing dependency on Beijing.

Upbeat on trade prospects, Mr Cha explained that the recently opened Tae-an Friendship Glass Factory, built with a $32m donation from the Chinese government, would export 40% of its 300-ton capacity, mainly to Siberia. Also Pyongyang’s first autumn international trade exhibition in October included companies from six European countries, the focus being on the country’s mineral potential rather than its manufacturing abilities, which are a long way off.

As for banks, the group of up to 15 joint venture banks are helping to finance the country’s 150 or so international companies. But do not expect miracles. The latest, Koryo Global Credit Bank, set up in June, is a joint venture between the UK-based Global Group, headed by Hong Kong businessman Johnny Hon, with 70%, and the state-owned Koryo Bank with 30%. Established with a paid-up capital of e10m, KGC Bank is ambitious in its plans to engage the DPRK in trade and commercial relations with the rest of the world, especially Asia, the Middle East and Europe.

KGCB’s first correspondent banking relationship in Europe is with Germany’s Helababank. The bank, the first product of cooperation in the finance field between the DPRK and the UK, has a staff of five and is also interested in investing in property. It was also able to produce, at the instigation of US authorities, a comprehensive anti-money laundering file.

Another local venture is North East Asia Bank (NEAB), which was set up by ING Group in 1995 but is now wholly owned by the Korean BOHOM Group. Amazingly, Kim Hyon Il, NEAB’s president, produced a balance sheet showing total assets of e79m at the end of 2004 and a paid-up capital of e25m. He also showed me the bank’s newest product, a chip-based cash/debit card, the first in the DPRK. The card demonstrates perhaps that the country is slowly joining the real world – but with only 100 issued and only 13 outlets available, the service has a long way to go.

Political effects

At Daedong Credit Bank, chief executive Nigel Cowie explained how international politics can have a dramatic impact on banking even in the isolated DPRK. In September, just before the conclusion of the fourth round of the Six-Party Talks, the US Treasury accused Banco Delta Asia (BDA), a Macao-based bank, of aiding the DPRK in a series of ‘money laundering’ cases. The Wall Street Journal had said the Macao crackdown was Washington’s method of cutting off Pyongyang’s financial sources for its nuclear weapons programme.

Mr Cowie, a former HSBC banker, explained that all DPRK banks had accounts with BDA for the purposes of remitting funds and, as a result, the accounts were suspended pending an inquiry in mid-November. While Stanley Au, chairman of BDA’s parent, denied the US allegations and BDA’s involvement in any illegal business relations with DPRK banks, the damage is done. “It affects our customers because it affects people’s ability to remit money to and from the country. I imagine that this will cause people doing legitimate business to give up,” says Mr Cowie.

The nuclear negotiations remain critical to the country’s future and the Chinese, in particular, want them to succeed. But that is just a start. There is evidence that the DPRK is opening up and changing with reports that there are 300 open markets operating across the country, 30 in Pyongyang. But whether the DPRK follows the China model of 25 years ago and can restructure its ‘powerful socialist nation’ doctrine remains doubtful under the current leadership.

Posted in 1990s Famine, Agriculture, Banking, Central Bank, China, Daedong Credit Bank, Fiscal & monetary policy, Foreign Trade Bank, GDP statistics, General markets (FMR: Farmers Market), Institute of Economy, Koryo Bank, Mass games, Ministry of Foreign Trade, North East Asia Bank (NEAB), Public Distribiution System (PDS), State Academy of Sciences, State Fiscal and Financial Committee, Statistics, Trade Statistics, UN World Food Program | Comments Closed

Aid Strengthens Kim’s Regime

Thursday, December 1st, 2005

Nautilus Institute
Andrei Lankov
12/1/2005

The recent news out of North Korea leaves no room for doubt. After a decade of grudgingly allowing small-scale free markets, Kim Jong Il’s regime is seeking to reimpose total control. Ironically this turning back of the clock is being aided by the “no strings attached” aid policies of two countries, China and South Korea, which claim to be trying to encourage reforms.

From early October, all trade in grain has been forbidden in the small private markets that mushroomed across North Korea when the state-run food distribution system largely collapsed during the famine of the 1990s. North Koreans are now expected to rely on a revived public distribution system for supplies of grain. Special teams of officials have fanned out to check farming households for any “excessive” supplies of grain they might try to sell in the private markets, and ensure they are left only with their officially allowed ration of 700 grams a day.

Internal travel controls are also being tightened. During the famine, authorities turned a blind eye to violations of the regime’s tough restrictions on freedom of movement, as starving North Koreans crisscrossed the country in search of food. Now these are being enforced once again, with North Koreans required to obtain a travel permit from police before they can travel elsewhere in the country.

Pyongyang’s moves in this direction should not come as a surprise. Allowing even a minimal degree of private enterprise reduces the regime’s absolute control over its citizens — especially if they are no longer dependent on the state for their food — and provides firsthand evidence of the existence of a more successful economic system. The Kim regime has seen how economic reform preceded the collapse of Communist regimes across Eastern Europe. It’s no coincidence that one of the questions most commonly heard in private conversations with members of the Pyongyang elite these days is about the fate of Communist cadres in the former East Germany. To avoid reforms is the surest survival strategy for Pyongyang’s ruling elite.

Throughout the past decade, the regime had no choice but to tolerate some degree of private economic activity, because of the collapse of its state-distribution system. But now that the North Korean economy has bottomed out and the famine appears to be over, largely due to generous aid shipments from the outside world, the Kim regime is in a position to get rid of changes that it never wanted in the first place. In addition to trying to curb the activities of private markets, it’s ordered most of the representatives of the international aid agencies that it reluctantly allowed into the country during the famine to leave by the end of the year.

The Kim regime can afford to act in this way because it knows that food aid from its two key patrons, South Korea and China, will keep flowing come what may. These now exceed shipments from elsewhere in the world. According to a recent report to the U.S. Congress, North Korea received 350,000 tons of food aid from South Korea and China in 2004 — compared with 325,000 tons from the World Food Program. Seoul also provides the North with much needed fertilizer, while China takes care of most of its energy needs.

China and, especially, South Korea claim to be supplying aid as part of a strategy of encouraging North Korea to embrace economic reform. That’s the ostensible aim of Seoul’s “sunshine policy” of one-sided concessions to the North, while Chinese leaders have shown visiting North Korean leaders around Shanghai and Shenzhen in an effort to encourage it to follow the same path. But, far from encouraging reform, North Korea’s recent actions show that it can take advantage of such unconditional aid to move in the opposition direction.

While Western countries insist on their aid being monitored by international relief agencies to try to prevent its diversion to the military, South Korea and China take a much more forgiving stance. Beijing wants stability on its borders, and would not be happy to see another nominally Communist regime collapsing. South Korea also wants to avoid the collapse of the Kim regime, since it would then have to foot the bill for an expensive and socially ruinous German-style unification. This means that both governments are ready to ship aid without asking too many awkward questions or demanding that it be closely monitored. Although ostensibly encouraging economic reform in North Korea, in reality both China and South Korea share the same short-term goal of preserving the status quo. They tacitly understand that means the regime must be able to continue to rely on its police and elite army units, and so needs to keep them well fed. That means turning a blind eye to the diversion of aid to the military, police and other members of the Pyongyang elite, even at the expense of the long-suffering North Korean people.

In the long run, this creates a paradox. Unless Seoul and Beijing are willing to foot the ever growing bills from Pyongyang indefinitely, they need to promote reforms there. However the North Korean regime has shown it has no interest in implementing reforms except when it is the only way to survive.

That creates an uneasy dilemma, which is shared by other foreign aid donors to North Korea. Stopping all aid could lead to renewed famine, especially in those areas of the country closed to foreigners. But excessive and unconditional aid is likely to halt all reforms, since the Pyongyang government would simply reverse to its old policies, using foreign aid to pay for the system’s inherent inefficiencies (and perhaps for a bit of luxury for Kim and his cronies). And recent events have clearly demonstrated have how counterproductive showering North Korea with aid can be.

Posted in Agriculture, Black markets, Economic reform, General markets (FMR: Farmers Market), International Aid, International trade, Nautilus Institute, Public Distribiution System (PDS), Transportation | Comments Closed

North Korean Economy Watch