Price liberalization « North Korean Economy Watch

Archive for the ‘Price liberalization’ Category

DPRK expecting bumper crop this fall

Tuesday, October 7th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-10-7-1
10/17/2008

It appears that many in North Korea are expecting an exceptionally large increase in this years’ harvest. According to a report issued on September 30 by Daily NK, a South Korean organization working for North Korean human rights, rice and corn market traders and those involved in food distribution are saying that grain harvests this year are significantly larger than last year, that by the end of the harvest season in November, North Korea’s food shortage crisis will be considerably eased, and that the price of rice will stabilize as well.

A source involved in China-North Korea trade at a company in Shenyang was quoted on the 30th as saying, “[North Korean] rice traders are expecting this year’s food production to be considerably improved compared to last year,” and, “This year, with no large natural disasters, rice paddies and crop fields are doing well, and crop production will probably be much greater than last year.”

In a related matter, one North Korean insider reported, “With the [North Korean] food situation, no one is doing as well as the wholesalers,” and, “As the fall harvest season has come, traders have come by farms in each province and reported that rice and corn harvests are very good.”

The source went on to say, “This year, farming was not difficult, so as autumn passes, the market price of rice looks likely to fall. The price of corn will fall even faster, hitting the 1000 won per kilogram level by mid October.” In fact, by the end of this year’s fall harvest, the price of food is expected to return to pre-shock levels. Currently, rice is selling for 2200 won and corn for 1300 won per kilogram in North Korean markets.

The reason harvests are expected to be more abundant this year is that the North has not suffered from flooding, as it had for the past several years in a row. Therefore, the government has called on the people to take care not to let any grain go to waste as harvesting is already in full swing in Hwanghae and South Pyungan provinces.

North Korean food wholesalers have become the suppliers of rice for markets since the government ceased to ration foodstuffs. They now contract with farms, paying in advance of harvest seasons so that the farms can use the funds to purchase fuel and other supplies necessary for preparing and transporting the food.

Because these traders personally visit the farms to predict harvests and set prices, the information is considered to be relatively accurate. These traders were also the first to predict the jump in prices earlier this year, warning of shortages even before last year’s fall harvest.

Posted in Agriculture, Agriculture statistics, Food, General markets (FMR: Farmers Market), Institute for Far Eastern Studies, Price liberalization, Statistics | 1 Comment »

Chinese official confirms DPRK grain smuggling

Wednesday, September 17th, 2008

Markets work because price increases send entrepreners strong signals of relative scarcity and potential profit opporunities (unless these price increases are caused by inflation). Entrepreneurs who pick up on these signals, then, have a strong incentive to move the desired resources from where they are valued less to where they are valued more.

A Chinese official in Jilin claims entrepreneurs in his province hear these signals loud and clear—and they respond the way humans have for thousands of years–they arbitrage:

The head of the grains bureau of Jilin, the Chinese province bordering North Korea, Zhu Yehui, says a drought in North Korea is very serious, and there is a lot of corn smuggling from China into North Korea.

He says the price in North Korea is more than 10 times the domestic price in China.

I am going to go out on a limb to suggest that these Chinese smugglers (entrepreneurs) are also delivering food more cheaply (on average) than the World Food Program, and I also am willing to wager that they have better access to “sensitive areas.”

Addendum: According to Yonhap North Korea’s grain crop last year reportedly amounted to 4 million tons. The U.N. Food and Agricultural Organization told U.S.-based Radio Free Asia last month that the North will harvest a half million tons less than last year.

Read the full article here:
China reports grain smuggling business active into North Korea
Australian Broadacsting Corporation
9/17/2008

Posted in Agriculture, Agriculture statistics, Food, Price liberalization, Statistics | 1 Comment »

A look inside Pyongyang’s Central Market

Tuesday, September 16th, 2008

Jerry Guo, a Yale University economics student who recently traveled to Pyongyang, wrote some interesting articles this week detailing his illicit adventures into Pyongyang’s Central Market (pictures below).

Pyongyang’s Central Market is located along the shore of the Taedong River and is visible from the Yanggakdo Hotel. Unlike the larger Tongil Market located on the south side of town, the Central Market does not receive tourists or foreign visitors—and given the location, its customers would probably prefer to keep it that way. So in a sense, an impromptu stroll to the Central Market offers every visitor to the DPRK exactly what they are looking for: a spontaneous glimpse at every-day life in Pyongyang.

According to Guo, that is exactly what he received:

But I wanted to catch a real glimpse of Pyongyang nightlife, so late one afternoon, I sneaked off unsupervised and hit the city streets. And much to my surprise, I didn’t see a single People’s Army cadet goose-step past me with those missile-launchers-on-wheels that appear on the nightly news. What I did witness: a mother buying a soda for her daughter from a sidewalk snack cart; two older women sitting on a bench, gossiping and eating pears; businessmen coming out of the subway, sans Bluetooth headsets; a grimacing teenage boy getting a haircut at a salon. (Washington Post)

Eventually he meandered into the Central District Market:

I had found myself in the North Korean version of Macy’s, but here, every day is the Friday after Thanksgiving. There were delicate blouses and dresses for around 15,000 won (roughly $4 at black market exchange rates), all sorts of fruit — thought to be nearly impossible to find in this mountainous hermit kingdom — and enough varieties of mystery meats to make my high school cafeteria green with envy.

…and he took some pictures (These pictures belong to Mr. Guo, and I thank him for letting me post them):

Above: Fruits and chickens for sale

Above: Side dishes/Sauces and clothing for sale

Above: View of the Central Market from the Yanggakdo Hotel

Taking these pictures, however, ushered in an unpleasant afternoon:

No one paid much attention to me, until I stopped to snap a few photos. Then a group of stocky women in pink dresses magically appeared. They half-wrestled me to a second-floor office while blowing fiercely on blue whistles, as if to announce, “Look at me! My first American spy!” For the next six hours, I was questioned and scrutinized by a procession of Public Safety Bureau officers, their rank identifiable by the quality of their outfits: the first wore an undershirt, the last what seemed to be a custom Italian suit.[…]

Eventually, they forced me to write a hyperbolic but harmless self-criticism, describing myself as “an American student,” “an incompetent trouble-maker” and “a genuine lover of the Korean people.” Then they booted me back to my five-star hotel.

Mr. Guo’s adventures have been chronicled in the following publications and they are well worth checking out:

My Excellent North Korean Adventure
Washington Post
Jerry Guo
9/14/2008; Page B02

A writer journeys into North Korea with Chinese tourists
Christian Science Monitor
Jerry Guo
9/16/2008

Yale Senior Enjoys Uncensored Day in N. Korea
National Public Radio
9/15/2008

And a caveat for future visitors: Although I personally appreciate knowing this type of information about the DPRK, I do not recommend other tourists take this course of action for numerous reasons!

Posted in Economic reform, General markets (FMR: Farmers Market), Price liberalization, Private property, Tourism, Uncategorized | 4 Comments »

Trouble again in the DPRK’s Chungjin market

Thursday, September 11th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-9-11-1
9/11/2008

Police recently clashed with women who had worked as traders in the market in North Korea’s Chungjin, in North Hamyong Province, who were demanding that crackdowns in the market be less severe until city officials are able to supply food rations. This report was released on September 9 by ‘Good Friends’, a human rights group in South Korea focusing on aid for the North.

According to the report, on August 24, patrolmen carried out a drastic crackdown in the market, leading women claiming that they need to continue working there to occupy one area. Ultimately, fighting broke out between the two groups.

Women upset with the implementation of rules restricting market trading by women under the age of 50 also led an organized protest in the Chungjin Market last March, demanding that they be allowed to continue working.

According to local residents, this time, the families of the women who had traded in the markets were strongly resisting, causing authorities to become concerned. This has led Chungjin city authorities, after reporting the incident to local party authorities at an emergency session, to pass down an order to local police and market managers to “not crack down too hard until after the September rations are distributed.”

Posted in Economic reform, Fiscal & monetary policy, General markets (FMR: Farmers Market), Institute for Far Eastern Studies, Price liberalization | Comments Closed

DPRK markets: What’s selling and for how much?

Saturday, September 6th, 2008

According to the Daily NK:

The new issue of NK In and Out (NKeconWatch is unable to find this publication on line) includes information about North Korea’s recent jangmadang (markets) developments, stating that “memory cards for digital cameras and even USB flash drive sticks can be bought easily in the jangmadang of major cities these days.”

The journal explained that most of the memory cards are under 1GB and although there are various types of memory cards, they are sold for ten to fifty thousand North Korean Won on average (approx. 3,400 to 17,200 South Korean Won, 3 to 16 USD). Demand for memory cards has been increasing due to the popularity of digital cameras and computers.

Recently there have been individuals that operate photo businesses at photo studios or state-operated shops in the downtown areas of cities. It is known that most of these individuals use digital cameras imported from China rather than film cameras.

The journal clarified that digital pictures can also be easily printed because certain trade organizations, broadcasting companies, convenience stores, or provincial computer centers have set up technology shops providing services to print pictures or produce music CDs.

Notably, a third of middle school students in large border cities own MP3 players and two to three students per class have personal computers at home. It is presumed that many more people own MP3 players or computers in major cities such as Pyongyang.

Below is some recent price information. Click on the image below to view full size.

Posted in Agriculture, Computing/IT, Food, General markets (FMR: Farmers Market), Price liberalization, Private property | Comments Closed

DPRK statute smorgasbord

Wednesday, September 3rd, 2008

On this page, I will keep a list of DPRK statutes and summaries:

1. Foreign Investment Law
2. Free Economic and Trade Zone Law
3. Equity Joint Venture Law
4. Contractual Joint Venture Law
5. Foreign Enterprises Law
6. Taxation of Foreign Invested Enterprises
7. Relevant Labor Laws
8. Leasing Land
9. Dispute Resolution
10. Domestic Sales Tax Regulations
11. Manufacturing & Export Operations
12. External Economic Arbitration Law
13. Commercial Joint Venture Law
14. Constitutions (x2)
15. Customs Law
16. Law on Economic Plans
17. Fisheries Law
18. Foreigners in FEZs
19. Intellectual Property

Click “read the rest of this entry” below to see summaries and statute text.

(more…)

Posted in Banking, DPRK Policies, Economic reform, Emigration, Finance, Fiscal & monetary policy, Foreign direct investment, Hwanggumphyong and Wihwado Economic Zones (Sinuiju), Intellectual Property, International trade, Joint Ventures, Labor conditions/wages, Manufacturing, Price liberalization, Private property, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013), Statutes | Comments Closed

Prices, deaths rise as grain stores run low

Sunday, August 24th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-22-1
8/22/2008

As the international community’s food aid to North Korea falls short of North Korean citizens’ expectations, previously falling rice prices have begun to rise again in August, according to ‘Good Friends’, a South Korean organization working for human rights in the DPRK.

In a recent issue (no. 189) of the group’s newsletter, “North Korea Today”, it was reported that “the amount of outside food [North Korean] authorities had promised did not come in, and at the same time, the rumor that not even smuggled rice from China had been able to come in since August spread among traders, raising the price 200-300 [DPRK] Won per day” for a kilogram of rice.

Last May, the price of rice had risen to 4000 won per kilogram, but began to fall as news of food aid from the United States emerged, bottoming out at 2300-2400 won last month. It has now risen back to between 2900-3050 won.

The newsletter reports that the reason prices are climbing is that in June, North Korean authorities were spreading the word that plenty of food would be coming in from the United States and other overseas donors, but in July, when expectations were not met, concern grew that supplies would run out. This led traders to horde stocks, driving prices up.

According to a North Korean document acquired by ‘Good Friends’ titled “Statistics on 2008 Lean Season Farmer Starvation”, as many as twenty to thirty people per farm died of hunger during the spring lean season (April-June). The document listed the cause of death simply ‘death from disease’, with no reference to what particular disease had befallen the victims, but ‘Good Friends’ reports that North Korean medical officials are saying the cause of death was malnutrition.

It also reports that at the Taesungri Farm, visited on several occasions by both Kim Il Sung and Kim Jong Il, poor harvests last year meant that the government was only able to provide two months worth of rations, leading to an increase in deaths during the lean season. In July, as small amounts of the year’s first crop began to be distributed, there were no deaths, but as August rolled around, people again began to die one or two at a time.

Posted in Agriculture, Food, Good Friends, Institute for Far Eastern Studies, International Aid, Price liberalization | Comments Closed

(UPDATED) UN World Food program gearing up for operations

Wednesday, July 30th, 2008

Update 3: The second shipment of US food aid has arrived in North Korea. Also, DPRK has suffered terrible rains in August. Story here and here.

UPDATE 2: The Daily NK reports some good news on the DPRKs food production:

With the stabilization of food prices in North Korea, which had skyrocketed during the first half of the year, the potato harvest which began at the end of June has been lifting the food burden of the citizens.

A source from North Korea said in a conversation with the Daily NK on the 26th, “In the border regions of North Hamkyung Province the first round of harvesting was successful. Accordingly, the price of new potatoes has fallen below 300 won since mid-July.”

The source added, “In the market in Hyesan, Yangkang Province, potatoes cost 280 won per kilogram. Newly-harvested barley has also been appearing; it’s a huge help to the civilians.”

Until the first week of June, the jangmadang price of potatoes in North Korea was 300 won in Pyongyang, 400 won in Hoiryeong, and 450 won in Chongjin per kilogram.

Regarding the price of rice and corn, the source continued, “In the North Hamkyung and Yangang Provinces, the price of rice is 2,200~2,400 won (per kg) and the price of corn 1,200~1,400 won. Originally, during the collective farm’s harvest distribution in December, 4kg of potato was equivalent to 1kg of corn, so the prices of rice and corn are not actually any more expensive now.”

UPDATE 1: Here (link) are the results of the UN World Food Program/FAO June DPRK survey. Some highlights:

The RFSA covered 53 counties in eight provinces (Ryanggang, North Hamgyong, South Hamgyong, Kangwon, North Hwanghae, South Hwanghae, South Phyongan, Pyongyang). Experts visited hundreds of households, child institutions and hospitals across the country in the most comprehensive assessment on food and nutrition conducted in DPRK since 2004. Key findings indicate:

Food availability, accessibility and utilization have deteriorated sharply since 2007.
Close to three quarters of the households have reduced their food intake.
More malnourished and ill children are being admitted to hospitals and institutions.
Diarrhoea caused by increased consumption of wild foods was one of the leading causes of malnutrition amongst children under five.

The experts found that the majority of the families surveyed have cut out protein from their diet, and are living on cereals and vegetables alone. Food prices have soared — rice now costs almost three times more than a year ago, and maize has quadrupled. Heavy reliance on support from relatives as a means of coping with food shortages is widespread in areas such as North Hamgyong Province, one of the worst affected regions.

Donors to WFP’s current programme in DPRK include the United States (US$60 million), Republic of Korea (US$20 million), Russian Federation (US$8 million), Switzerland (US$6.6 million), Germany (US$3.4 million), Australia (US$4.2 million), UN CERF (US$2.3 million, for CERF see: http://ochaonline.un.org), Multilateral funds (US$1.9 million), Cuba and Italy (US$1.5 million each), Canada, Denmark, Ireland, Luxembourg and Norway (US$1 million each), Finland (US$737,000), Turkey (US$150,000), Greece (US$ 45,000) and private donors (US$17,000).

ORIGINAL POST: North Korea’s food crisis has been out of the headlines since US food aid arrived a couple of weeks ago followed by the destruction of the Yongbyon cooling tower, six-party talks progress, ASEAN non-aggression treaty, and Kumgang shooting incident. But now that the UN World Food Program is preparing operations, the crisis is back in the news. From the Wahsington Post:

The main U.N. aid agency in North Korea, the World Food Program, will resume emergency operations there in the next two weeks to help feed more than 5 million people over the next 15 months at a cost of $500 million, said Jean-Pierre de Margerie, the agency’s country director in Pyongyang.

“The situation is indeed very serious,” de Margerie said at a news conference in Beijing.

The resumption of emergency operations, which were scaled back in 2005 on a request from the North Korean government, was decided after a U.N. survey last month showed the most severe and widespread hunger among North Koreans in a decade. The survey was taken after the Pyongyang government, in an unusual gesture, officially acknowledged a growing hunger crisis and appealed for international aid.

and

[…] the United States recently pledged to give North Korea 500,000 tons of food over the next six months, most of which will be distributed by the World Food Program as part of its emergency effort. De Margerie said the first delivery, 37,000 tons of wheat, arrived in a North Korean port two weeks ago, and more shiploads are expected soon.

In contrast to past practice, the North Korean government has been willing to allow U.N. aid workers more leeway to monitor delivery of the new food supplies, de Margerie said. Similarly supple oversight rules were negotiated by the United States as a condition for its 500,000-ton donation.

The ballooning food crisis began mainly because of flooding last summer that damaged fields, leading to insufficient crops and soaring food prices. At the same time, de Margerie said, imports dropped dramatically this spring, particularly from South Korea and China.

This exacerbated a perennial shortfall of around 20 percent, or 1.6 million tons, in the amount of food needed to adequately nourish North Korea’s 23 million inhabitants. As a result, prices of such staples as rice, eggs and corn doubled, tripled and even quadrupled, de Margerie said.

Now, de Margerie said, resumption of emergency operations will aim at getting food to between 5 million and 6 million people by September, which is considered a critical period because this autumn’s crops will not have entered the government-run distribution system. Quick donations of about $20 million are needed to get the new program running swiftly, he added.

And where are these funds going to come from. Well, New Zealand has made public its intentions to fund the effort:

New Zealand will provide half a million dollars to the United Nations to help North Korea which is facing a food shortage.

New Zealand previously gave $500,000 via the Red Cross after last year’s floods.

New Zealand established diplomatic relations with North Korea in 2001.

According to Yonhap:

The areas undergoing the crisis include the Hamgyong and Ryanggang provinces, the site said, adding that the World Food Programme plans to launch a new project to address the food needs in these northeastern regions.

Read the full stories here:
U.N.: Millions Hungry in North Korea
Washington Post Foreign Service
Edward Cody
7/30/2008

NZ to give aid to North Korea
National Business Review
6/29/2008

Northeastern NK in serious food crisis: UN Web site
Yonhap
7/26/2008

Posted in Agriculture, Agriculture statistics, Food, Foreign aid statistics, General markets (FMR: Farmers Market), International Aid, Price liberalization, Public Distribiution System (PDS), UN, UN World Food Program | Comments Closed

Lankov and Kim on North Korean market vendors

Wednesday, July 23rd, 2008

“North Korean Market Vendors: The Rise of Grassroots Capitalists in a Post-Stalinist Society”
Andrei Lankov and Kim Seok-hyang
Pacific Affairs, Vol. 81 Iss.1
(subscription required)

Abstract:
The article deals with the social changes that have taken place in North Korea [from 1994-2002], when the collapse of the centrally planned economy led to the growth of private commercial activity. This activity remains technically illegal, but the relevant bans and restrictions have rarely been enforced due to endemic corruption and disorganization of the state bureaucracy. The article is largely based on in-depth interviews with North Korean black market operators [who have defected to South Korea]. It traces their origins, the type and scale of their business, and changes in their mode of operation.

The article demonstrates that the “second economy” came to dominate North Korean economic life by the late 1990s, since authorities’ attempts to limit its scale were largely ineffective. The growth of the “second economy” produced new grassroots capitalists who sometimes came from underpriveledged social groups, but more typically represented people with good official connections. It is also remarkable that foreign connections (usually with China) played a major role: to a large extent, merchandise sold at the North Korean markets either came from overseas or was exported overseas eventually, and in many cases the merchants’ initial capital was also provided by relatives residing overseas.

Some highlights:
1. Changsa is the North Korean word for “dealings in the marketplace.” Tonju is the word for money changers/lenders meaning “master of money”.
2. Public Distribution System (PDS) rations were cut for the first time in 1973.
3. The DPRK system restricted market activity primarily through three mechanisms: limited size of family farming plots, inminban surveillance system, and travel permits.
4. Before the arduous march, North Koreans were not inclined to resort to market trade. These transactions were seen as ethically suspect. Once the famine hit, people took up market trading remarkably quickly.
5. Before the arduous march, bribery was rare, even though patronage and indirect forms of corruption were rampant. Mid-level bureaucrats had to vie for preferred access to poor-quality consumer goods, better schools, and study trips abroad.
6. At the height of the arduous march (1997), production was at 46% of capacity.
7. North Korean traders seldom if ever have to deal with the protection racket. When asked directly, respondents did not mention threats from mobsters as one of their security concerns (I wonder if this is still the case).
8. Pyongsong market is reputed to be the largest in the country. It is just outside Pyongyang, making it accessible to citizens inside the capital as well as those who cannot get permits to enter the city (Pictured below with Google Earth coordinates).

Click on image for larger view

9. Financial services such as money-changers and private loan sharks offer loans at 5%-30%/month.
10. Most North Korean merchants know South Korea is a rich country. They also avoid surveillance since these activities are done at state-owned enterprises and study sessions.

Posted in Automobiles, Banking, Black markets, Economic reform, Finance, Fiscal & monetary policy, Foreign direct investment, Google Earth, Insurance, Joint Ventures, Price liberalization, Private property, Public Distribiution System (PDS), Railways, Transportation | 1 Comment »

What caused the DPRK’s spring ’08 food price increases?

Sunday, July 13th, 2008

North Korea’s agricultural and food markets suffer from a number of permanent constraints that prevent their efficient operation. Rail transport is slow and/or unreliable, internal travel restrictions for “ordinary” merchants, and poor road conditions limit the distance food can travel before it goes bad. Restrictions on communications and lack of a futures market makes it difficult to know how much food is available in each location, or what is expected to be available in each location. This leads to hoarding, volatile prices, and a mismatch between local supply and demand. Compounding these basic problems is a poor business environment characterized by collective farming practices, corruption, bribery, poor property rights protection, poor contract enforcement, and ex-post expropriation of profits. Given these constraints, it is amazing agricultural and food markets work at all.

In addition to these factors, the DPRK’s food markets suffered a number of adverse supply shocks this year from flooding, China’s restrictions on food exports, and a decrease in expected food aid from China, South Korea, and the US (See the effects on prices in this chart by Noland/Haggard/Weeks here). The arrival of food aid has since brought some of these prices down.

This week, the Daily NK reports on two other causes of price increases in the DPRK: Anti-corruption campaigns and restrictions on farming private plots.

Anti Corruption campaigns (more here and here)

He reported that “From March to late April, for almost 40 days, inspections were undertaken nationally. In Hwanghae Province, the inspection groups under the Central Court came down and confiscated food which the cadres in farms had embezzled. In some cases, they confiscated 500-1000kg of rice and grains from cadres’ households by searching with metal sticks in their backyard.”

The Director of the Ministry of Administration of the Chosun (North Korea) Workers’ Party Jang Sung Taek and his inspection group went to Shinuiju and inspected persons in charge of trading.

No. 112 Land System

The No. 112 land system operates whereby the authorities offer a certain width of fallow lands, which are different by grade of food distribution amount, to national public servants and clerical workers, given in order to make them solve their food problem by farming instead of relying on distribution. Ishimaru explained that “However, the new Kim Young Il cabinet abrogated this system and banned them from planting seeds on those fields.”

Read the full story here:
Intensive Inspections in March and April a Direct Reason for Rise in Food Prices
Daily NK
Kim So Yeol
7/4/2008

Posted in Agriculture, Food, General markets (FMR: Farmers Market), Price liberalization, Private property | Comments Closed

North Korean Economy Watch