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Marcus Noland on NK’s refugees and economy

Sunday, January 16th, 2011

Evan Ramstad at the Wall Street Journal: Korea Real Time interviews Marcus Noland:

Only a handful of outside economists spend the enormous time required to delve into the mysteries of North Korea.

Marcus Noland is one of them. With his research and writing partner Stephen Haggard, Mr. Noland has written several books about the North, including a definitive study on the famine that gripped the country from the mid- to late-1990s and resulted in the death of at least 1 million people and perhaps upwards of 2 million.

In a new book published this week, called Witness to Transformation: Refugee Insights into North Korea, Messrs. Noland and Haggard produce the results of interviews they and their researchers conducted with more than 1,600 North Koreans who fled the country. The interviews took place from 2004 to 2008 and involved people who left North Korea as early as 1991.

The book documents the remarkable changes inside the North through the eyes of people who lived through them. Of course, it’s a group that holds negative views of North Korea. But the economists do their best to take that into account.

Mr. Noland, who is based at the Peterson Institute for International Economics in Washington, discussed the book with us. Here’s an excerpt of the interview:

WSJ: Most books and studies on North Korea by people outside the country are focused on the nuclear weapons issue and the geopolitics around that. Why have you focused on refugees and the economy?

Mr. Noland: An understudied aspect of the North Korea story, we believe, is the really quite dramatic internal changes that have been going on in North Korea over the last 10 to 20 years. North Korea poses an analytical challenge in that access is limited and the conventional ways that one could go studying a country aren’t available. In this context, the diaspora of refugees leaving the country is an important source of information.

The refugees themselves constitute a first-order crisis. Most of these people, in a clinical setting, would probably be diagnosed with post-traumatic stress disorder. Their mental health issues appear to be related not only to the difficult circumstances they faced in China but their experiences in North Korea.

WSJ: What is the cause of those stresses?

Mr. Noland: Specifically the loss of family members and family separations associated with the famine. The sense among many of them that they were abandoned in their moment of greatest need. The feeling that they were not given access to international humanitarian aid, which many of them believe was diverted to the military. And the experience of many of them of having been arrested and incarcerated in North Korea’s vast and sprawling penal system.

So the refugees themselves are an issue. They also provide us a window into North Korea.

WSJ: What did you learn from them?

Mr. Noland: Our book addresses three broad issues, which they illuminate.

The first is the underlying economic changes in the country. What we find is the economy has essentially marketized over the last 15 years or so, not as any kind of planned reform but rather as a function of state failure. What is extraordinary is the degree of marketization that the refugees portray when describing their daily lives. They describe a situation in which doing business or engaging in corrupt or illegal activities is increasingly seen as the way to get ahead in North Korea. And positions in the state or the party are still highly desired and seen as a way to get ahead, but not out of patriotism because these positions increasingly provide a platform for extortion of the general population.

Which brings us to the second big theme of the book and that is the criminalization of economic activity and the use of this vast penal system not only for its traditional use as a tool of political intimidation but for economic extortion. What we find is that changes in the North Korean legal code have criminalized vast areas of economic life, the sort of economic life that real people actually lead. In their daily lives, most if not all of North Korea’s non-elites run afoul of some of these statutes, which in effects makes everyone a criminal.

The fact that everyone is running afoul of some statute is combined with the fact that the police are given extraordinary discretion in who they arrest and who they incarcerate and for what period of time. We find that the North Korean penal system has four components. The worst and best known are the long-term political prisons, the North Korean gulag that was set up by Soviet advisors. There’s also a set of institutions that are effectively felony prisons, where you put the murderers and the rapists. Then there are a set of institutions that correspond to misdemeanor jails in other societies. What has developed since the famine period of the 1990s is a fourth set of institutions that have been codified. Those primarily house people who have made economic crimes, such as hiring labor for money or selling things in the market that you’re not supposed to be selling. We go through the enormous expansion of articles in the North Korean legal code to cover these crimes, such as illegally operating a restaurant.

This is a fantastic instrument for extortion. It means if you were engaging in entrepreneurial behavior, the police can come to you and say ‘You’re engaged in illegal activity. We can take you, take your spouse, take your kid and put them in this institution where you know horrible things happen.’ So the penal system not only serves its traditional function as a platform for political corruption but we find it is now a platform for economic predation as well.

We discovered something that we call the ‘market syndrome.’ It is a series of characteristics that seem to be linked with engaging in market activities. People who engage in market activities are 50% more likely to be arrested than their counterparts. They are more likely to harbor more negative appraisals of the regime than their counterparts. And in a society where people are afraid to express their opinions, these guys who are engaged in the market, who have been to jail and been released, are more likely to express their views to others. That is to say that the market is emerging as a kind of semi-autonomous zone of social communication and potentially political organizing. And in that sense, the regime is right to fear the market.

And that brings us to the final theme, and that is the political attitudes of these people and nascent dissent. What we find is people have very negative appraisals of the regime. That’s not surprising. We’re sampling from a group of people that have voted with their feet and one would expect them to have negative views, though we go through fairly elaborate statistical exercises to try to control as best we can for the demographic characteristics of the people we’ve interviewed.

People have very negative views of the regime. They are increasingly disinclined to believe the regime’s meta-narrative, which rationalizes their misery as a function of being held captive by hostile foreign forces. Most of these people hold the government itself as responsible for their plight.

WSJ: You two previously wrote one of the seminal studies on the North Korean famine (Famine in North Korea: Markets, Aid and Reform), what did the refugees tell you about living through that?

Mr. Noland: Both Steph and I were really struck by was just how the famine experience reverberates. The famine was more than 10 years ago. It ended in 1998. A significant share of the people, I think about a third, reported separation from, or death of, family members during that process. You had people out scavenging to find food. People going to China. Family separation and death of family members just continued to reverberate.

We asked them: ‘Were you aware of the international food aid program?’ The numbers differ in our surveys, but significant numbers of people were unaware of the food aid program. It was astonishing to us.

Then, among the ones who were aware, we asked `Do you believe you were a beneficiary?’ Only a small minority responded yes. And when we run all the regressions, this status of knowing of the existence of the program but believing you were not a beneficiary, this is a profoundly demoralizing experience. These people feel they were abandoned at this time of need, when they were seeing their families and neighbors dying. They believe it’s going to the army and the elites. That group of people, when we run the psychological tests and ask them their views of the regime, this is an embittered group. The effect of that experience is bigger than being in the prisons.

We wrote a book on the famine, so obviously we’re interested in it. But we were surprised and we wouldn’t have guessed that this experience continues to reverberate among the people who lived through it.

Read the full story here:
Marcus Noland on NK’s Refugees and Economy
Wall Street Journal: Korea Real Time
Evan Ramstad
1/12/2011

Posted in 1990s Famine, 2002 Economic reforms, Arduous March, Black markets, DPRK Policies, Economic reform, General markets (FMR: Farmers Market), Political economy, Price liberalization | Comments Closed

Travel permits in the DPRK

Sunday, January 2nd, 2011

Andrei Lankov writes in the Korea Times:

The North Korea of the old Stalinist days is gradually dying. In some regards the North is still a Stalinist society, but it is changing even if these changes do not necessarily attract much outside attention. One of the most dramatic transformations of the last year is a great relaxation of the control over movement inside North Korea.

Let’s start from how the system used to work in the past. For decades, no North Korean was allowed to leave his or her native county without special travel permit, to be issued by local authorities. The only exception was that a North Korean could visit counties which had a common border with the county where he or she had official household registration. If found outside his or her native county without a proper permit, a North Korean was arrested and then ‘extradited’ back to their native county for appropriate punishment.

There had to be valid reasons for issuing a travel permit, unless the person went somewhere on official business. In most cases one had to produce an invitation from relatives for a wedding or funeral or other sufficiently important event. Then the paperwork could begin. In most cases the application was first authorized by the party secretary in one’s work unit, then it was sent to police and, finally, to the so-called “second department” of a local government (these departments were staffed with police officers).

There were various types of travel permits. For example, a trip to some special areas, like Pyongyang or districts near the DMZ, required a special travel permit which had to be confirmed by Pyongyang. There were also special types of permits for the military and some very special types for big wigs.

A trip overseas was virtually impossible. North Koreans could go abroad only on official missions and, in a very limited number of cases, they were permitted to visit relatives in China.

The system crumbled in the mid-1990s. The Great Famine made it unsustainable. Around 1996 the public distribution system collapsed, and millions of North Koreans began to move all over the country looking for food. The government turned a blind eye to their activities, and soon the restrictions ceased to be enforced.

It is not clear to what extent the travel control system was officially relaxed, and to what extent the changes resulted from benign neglect. For all practical purposes, from around 1997-98 the North Koreans enjoyed some freedom to travel without permits, with Pyongyang and some sensitive areas being an exception. This sudden relaxation (even collapse) of the domestic controls was a necessary preliminary condition for the explosive growth of private economic activities in the country. People could trade only because they could travel.

North Koreans also began to cross the border and travel to China where they looked for food and jobs. Crossing the border was illegal, but it was impossible for a country with a crumbling economy to enforce border control. Thus, once again, authorities turned a blind eye on everything which was happening in those areas.

In 2001 the system changed again. The Great Famine was over, largely due to the efforts of international relief agencies and the new policies of Seoul busily feeding its “brother/enemy.” Thus, the system of travel permits was re-introduced, but its new version, in operation from 2002, is less restrictive than earlier regulations – and still largely ignored.

Nowadays, the authorities issue travel permits for trips lasting a week or two. Often they can be bribed to speed up the process, and in such a case the permits are produced almost immediately. The amount of bribe varies, depending on the destination: from some $10 for Pyongyang to merely $2 to $3 for a humble countryside destination. Money seems to be paid usually in exchange for speed.

There is something even more remarkable: In recent years North Korean authorities began to issue certificates which allow its bearer to travel to China, crossing the border legally. The procedure is time-consuming, taking about six months. As usual, it requires special security checks by the authorities. However, the outcome of such procedures is not pre-ordained, so generous payments are helpful to steer officials in the right direction. In this case, the bribes are much larger, up to $100 (as opposed to the usual $50). For the average Korean this is a large amount of money, but a majority of the applicants are engaged in the cross-border shuttle activity, and for them $100 is not an exorbitant sum. They are quite happy to get permits. Even if they pay bribes they still feel themselves more secure and more law-abiding. Being Koreans, they obviously prefer to go about business legitimately.

So, the old system is dying, even though the authorities would much prefer to keep it in place. Nonetheless, it might take many years before these changes have meaningful political consequences.

Read the full story here:
Travel permits in N. Korea
Korea Times
Andrei Lankov
1/2/2010

Posted in Arduous March, General markets (FMR: Farmers Market), Transportation | 1 Comment »

DPRK has markets but still no market institutions

Friday, December 31st, 2010

(Pictured above: Areas in Pyongyang where street stalls have reportedly become more numerous—via Google Earth)

Although we in the west note the proliferation of markets across the DPRK, the Daily NK reminds us that they still lack the institutions of capitalism: security of contract and property, rule of law, etc. According to the article:

Kim Sun Jung, who is a wholesaler in Pyongyang, talked to The Daily NK on Tuesday from the border region in North Korea. She said, “Wives of military officials and general workers should engage in trade in order to get by even in Pyongyang. Those who cannot get a stall in a permanent market (an allowed market, called jangmadang) sell goods in alley markets near the jangmadang, neighborhood alleys or on the banks of the Daedong River, but they always get trouble from PSM agents and community watchmen, who systematically squeeze money and goods from them.”

According to Kim, currently in the center of Pyongyang, the Pyongcheon and Jung districts on the west side of the Daedong River, and the Sunkyo, Dongdaewon and Daedong River districts on the east side, the number of street stalls set up along the river has been increasing greatly.

Traders selling goods along the river are chased every day by agents. If they are caught, they have to pay for the stalls. The cost is the same for a stall in permanent markets, 250 won per stall.

She said that, “In order to avoid paying the 250 won street tax, you often see traders clutching their goods while running this way or that way. Nowadays, agents use cell phones, so it is not so easy to get away.”

Besides the costs for a stall, agents regularly demand meat and alcohol in order to offer them to their cadres including the chairman of the PSM office. If they have not gathered as much as they want through bribes, they confiscate goods and impose fines, around 20,000 or 30,000 won, and offer the excuse that, “Trade is prohibited by those above.”

She said such despotism is directed not only at illegal trade but also at the jangmadang. She explained, “In a permanent market when the chief manager (of the market management office) comes to the site under the pretext of doing an inspection, after collecting as many goods as he wants, he leaves the market without having carried out any inspection.”

In addition, according to sources in the jangmadang, street vendors have been spreading recently. Agents help themselves to food and alcohol there without paying. The street vendors sell pork and alcohol until 11 in the evening and after agents eat there, they leave saying only, “Comrade, trade well.”

Lee Ok Rim, who sells goods in a market in Pyongsung, South Pyongan Province, explained another type of extortion, “Even though the authorities have been strictly monitoring the sale of South Korean goods, traders cannot give them up because they’re good. Accordingly, agents take advantage of this situation: they will confiscate all South Korean goods through a sudden crackdown, and then a few days later, if they get tens of thousands of won in fines, they give the goods back to the traders.”

She explained, “When wholesalers who smuggle South Korean goods through Shinuiju are caught, they must pay 100,000 won as a fine.” Once wholesalers are caught, they make the acquaintance of the agent in charge, offer bribes regularly, and then will not have any further problems in supplying South Korean goods. For agents who are in charge of monitoring wholesalers, this is a big business, so they generally put a lot of work into monitoring them because the scale of regular bribes from wholesalers is huge.”

Therefore, traders openly say that, “Agents are much higher than secretaries of the Central Committee of the Party,” according to Lee.

Read the full story here:
Bribery and Extortion Are Common in North Korean Commerce
Daily NK
Shin Joo Hyun
12/31/2010

Posted in Black markets, Economic reform, General markets (FMR: Farmers Market) | Comments Closed

DPRK rice price stubbornly high

Wednesday, December 29th, 2010

According to the Daily NK:

Even though the price of rice is over 1,300 won per kilogram in North Korean markets, cadres and the upper class are hoarding rice and grain. This is because a rumor is spreading saying that the international community may suspend food aid to North Korea next year due to the Yeonpyeong attack so the price of rice may not drop next year.

A source from Hoiryeong, North Hamkyung Province, said that, “In the Hoiryeong Jangmadang, rice sells over for 1,300 won per kilogram. Even though it is an unreasonably higher price than in previous years, the wealthy are hoarding the rice they will consume for the next year.”

Immediately after the Yeonpyeong attack, the price of rice soared to over 1,300 won and has stayed at that level. This is because the value of the Yuan has gone up since the currency redenomination last year.

The source explained, “Despite the high price of rice, people purchase it in bulk because they believe that next year the price may not decline considering the current trend.” He added, “A rumor that we won’t receive food aid next year due to being internationally isolated has been circulated by those who get international and domestic information via foreign radio or those who have visited China for private reasons.”

The source reported that, “Based on the experiences of the last decade, people know very well that there will be no food aid from the outside world when the situation is tense like it is this year.”

“Not only those who support themselves through commerce, but also family members of officials of the National Security Agency and People’s Safety Ministry, who primarily live off the national distribution system, are spending all the money they’ve saved to buy up food. They buy reserve provisions in order not to worry about a possible suspension of the distribution system.”

According to the explanation of the source, at the time of the November 30 currency redenomination last year, those who had goods to trade did not get hit hard. Therefore, wealthy people try to obtain more food despite the high price.

Read the full story here:
The Rich Hoarding Rice
Daily NK
Yoo Gwan Hee
12/29/2010

Posted in Economic reform, Food, General markets (FMR: Farmers Market), Price liberalization | Comments Closed

Hot 2010 DPRK consumer goods

Tuesday, December 28th, 2010

According to Yonhap:

Skinny jeans, blue crabs, pig-intestine rolls and even human manure were some of the hottest items among North Korean consumers this year, according to a South Korean professor who has interviewed recent defectors from the communist country.

Kim Young-soo, a political science professor at Seoul’s Sogang University, said in a conference on Tuesday that adult movies, television dramas and instant noodle “ramen” made in South Korea are also selling “like hot cakes” in North Korea.

Skinny jeans refer to slim-fit pants that have gained popularity around the world, said Kim who interviewed about 2,000 defectors this year as part of a research project for the government.

He said that skinny jeans are so popular in the North’s capital, Pyongyang, that people there sometimes mistakenly believe Chinese wearing the stylish clothes are roaming their capital.

“These are signs that North Korea is easing its isolation,” Kim said in a telephone interview, noting that such lifestyle changes are conspicuous in Pyongyang and areas near the border with China.

The professor said many of the defectors he has interviewed had stayed in China no longer than a month before they came to South Korea, allowing him to have a relatively up-to-date glimpse of the latest culture in the communist country.

Kim said defectors told him pine mushrooms were also a “hit” among North Koreans this year because exports to South Korea had been diverted into the domestic market since cross-border tensions soared over the deadly March sinking of a South Korean warship.

After a multinational investigation in May found North Korea responsible for the sinking that killed 46 sailors, Seoul banned cross-border trade as part of its punitive measures.

Kim said blue crabs have met the same fate as pine mushrooms, allowing North Koreans to enjoy what was once a rarity for them. The professor even told of a shop in which human manure could be traded to be used as an alternative to chemical fertilizer, an item on which the North had heavily depended from the South for years.

“Soondae,” or sausage rolls stuffed with ingredients such as noodles and vegetables and wrapped in pig intestine films, has also made inroads into the market as a staple after the military stopped collecting pork and other food items from civilians, Kim said.

“These changes may not necessarily lead to greater ones in society, but they do bear a meaning,” he said.

Read the full sotry here:
Skinny jeans, pig-intestine rolls among “hit items” in North Korea this year: survey
Yonhap
Sam Kim
12/28/2010

Posted in Clothing, Finance, Food, General markets (FMR: Farmers Market), International trade | Comments Closed

An upbeat DPRK economic report from China…

Wednesday, December 22nd, 2010

A reporter in China feels the last year has been a good one for the DPRK (in economic terms). I would take issue with some parts of his article (posted below), but the time I can devote to blogging is pretty slim until the end of January (field exam for school). You are smart enough to form your own opinions in the meantime!

Here is the full article from China Daily:

Few people know that the Democratic People’s Republic of Korea (DPRK) was a relatively prosperous country in the late 1970s and 1980s. In 1979, its grain output reached 9 million tons, increasing to 10 million tons in 1984. In fact, it used to be a rice exporter during that period.

The DPRK economy started declining in the 1990s when a lot of its resources were diverted to defense and heavy industries, seriously hindering the development of agriculture and light industries. Besides, environmental destruction damaged the rich soil, making it impossible for the country to return to its past agricultural glory.

As a result, the DPRK’s economy registered negative growth in the late 1990s, and didn’t improve until 2000.

In 2009, when the international community was still worried over its second nuclear test in May, the DPRK launched economic development campaigns such as the “150-day battle”, and vowed to make the year a turning point toward economic strength and prosperity.

Let’s see the changes in the country after more than one year of the campaigns.

This year has seen many changes in the DPRK. New technologies such as computerized numerical control have been introduced to help light industries, and more cash crops grown to raise funds or exchange them with other countries for grain.

The year has seen a remarkable increase in the number of neon lamps and lights on Pyongyang’s roads and in residential buildings. Thanks to the construction of hydropower stations such as the Huichon Power Station in Chagang province and Wonsan Youth Power Station in Kangwon province, Pyongyang and Kangwon’s Wonsan city now get relatively stable electricity supply.

A drastic change in the DPRK’s economy this year is the drop in the price of rice. The DPRK government has lowered the price of rationed rice from 46 won to 24 won a kg.

In the open market, rice price dropped from 2,000 won a kg in 2009 to 1,500 won a kg in September this year. In November, it fell further to 900 won a kg in Pyongyang’s markets.

The availability of consumer goods has increased both in variety and quantity because of more and improved supply channels. Residents now rely on goods rationed by the government, as well as those available in markets and convenience stores. More special shops are selling necessities, although they cost more than in ration shops.

Contrary to some experts’ prediction, currency reform has not created a crisis or led to economic depression in the country. In 2009, the exchange rate of the yuan to the won was 1:500. This year it is 1:200, more than doubling the purchasing power of people in the DPRK.

Moreover, even though the currency reform has shrunk people’s fortunes, most of them have not suffered economic shocks.

Several facts prove that the living standards in the DPRK have improved this year. The supply of DPRK-made beer has increased, in variety and volume both, and the country may not need to import beer anymore. A bottle of rice beer costs about 600 to 700 won. More restaurants have opened in cities, and bicycles have become common in places where they were rare to find earlier.

Even the number of cell phone users has increased – to at least 80,000 – though the 200,000 to 600,000 won needed to use a mobile phone is still high and the handsets and service need to be improved.

In more sense than one, this year has a special meaning for the DPRK, not least because it chose its next generation leader. The year marks the 65th anniversary of the ruling Labor Party, too.

Though the DPRK’s claim of building an economically prosperous country in two more years may be exaggerated, we can see some obvious changes in the country. It is opening up to the rest of the world and shifting its attention from defense to people’s welfare.

But there is no denying that the DPRK now wants to develop the economy. This will become clearer if one has followed the country’s official media. During the new year’s comment, the Korean Central News Agency used the words “improving people’s lives” 16 times, a rarity earlier. Even in 2009, the words were used only once.

The DPRK tried to increase people’s income in 2002 but failed because it didn’t have enough goods then. The high inflation that followed made things worse.

Though last year’s currency reform didn’t raise people’s income directly, it has defused the currency bubble to a large extent. And this time the supply of more goods to meet rising demands has helped the country to move forward.

The currency reform, despite some negative effects, has not only improved people’s living conditions, but also built a sound financial base for the DPRK to welcome international economic cooperation in the near future.

If time and conditions allow, economic interaction could help the DPRK maintain peace in the region. The possibility of the DPRK economy suffering a 2002-like setback, however, cannot be ruled out.

Its weak agriculture and light industries are still not in a condition to support development in the long term. Plus, it has to depend on imports for 80 percent of consumer goods in the short term.

But 2010 is still a special year for the DPRK, for it is standing at a crossroads from where it can start attracting investment because capital now holds the key.

That means opportunities for China. The market for consumer goods such as light bulbs and cell phones are expanding in the DPRK, while rising demand for other products has created a larger profit space. Besides, the DPRK could open its resource markets to raise funds.

The DPRK’s economic development is good for China’s security and overall economic cooperation in the entire region. The international community should use this opportunity to help the DPRK open up to the rest of world. That would go a long way in resolving the Korean Peninsula nuclear issue than flexing of military muscles.

Read the full story here:
DPRK at economic crossroads
China Daily
Jin Meihua
12/22/2010

Posted in Agriculture, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Price liberalization | 9 Comments »

Chinese trade undermining DPRK information blockade

Thursday, December 16th, 2010

According to the Korea Herald:

Although not so explicitly, the communist North Korea appears to be becoming more aware of capitalist cultures and trends, a change the Kim Jong-il regime has feared the most and tried to prevent for decades.

Not only the social upper crust, but the majority of the general public has seen popular South Korean TV series through copies that flow in from China and is aware of the financial gap between the two divided states, North Korean defectors said during a recent forum in Seoul.

According to the defectors ― among hundreds of others who attempt to abandon their impoverished state and escape to the wealthier South each year ― such changes are causing a headache for the North Korean leader trying to secure internal unity before handing over the regime to his youngest son.

“It is difficult to fend off South Korean products and TV shows from entering the country so as long as China remains to be its main trade partner and financial donor,” said Ju Seong-ha, a North Korean defector who graduated from the North’s top Kim Il-sung University.

“The recent phenomena may result in North Koreans choosing South Korea over their own country when the time comes for them to decide.”

North Korea, which is one of the world’s last remaining totalitarian states and also one of the most secretive nations, keeps its people largely isolated from outside news and strictly forbids them from possessing goods that are not distributed by the ruling Workers’ Party.

But the impoverished state’s heavy dependence on Beijing for food and other commodities is inevitably opening up its people to goods and cultures from capitalist nations, particularly South Korea.

China has emerged as the world’s second largest economy after abandoning Stalinist policies and is one of the largest markets for South Korean pop culture, also widely known as “hallyu.”

Most copies of popular South Korean TV series and news that flow into North Korea are produced in China, which is notorious for illegally making cheap, low-quality copies of copyrighted materials.

A 20-something North Korean who escaped to Seoul last year said he had been “shocked” at the sight of South Korea the first time he saw a soap opera starring the country’s top celebrities.

“We had been told South Korea was an underdeveloped country full of beggars,” the defector said, requesting not to be named for safety reasons. “What I saw were beautiful, trendy people living in a glamorous city.”

“I say 90 percent of North Koreans have seen a South Korean TV series at least once,” he said.

Even security and judiciary officials watch popular South Korean soap operas in secret, another unnamed defector told the Dec. 10 forum in Seoul.

“Because the DVD players are sold at a relatively cheap price in North Korea, many households possess them and share CDs among themselves,” the defector said. “Seeing for themselves how well-off and happy people in the South seem, many people build up admiration for the country.”

The apparent popularity of South Korean culture in North Korea coincides with President Lee Myung-bak’s recently made remarks during his trip to Malaysia.

“No one can possibly stop the changes brewing among the general North Korean public,” the South Korean president had said.

Read the full story here:
Changes brewing in ‘not so isolated’ North
The Korea Herald
Shin Hae-in
12/15/2010

Posted in Black markets, China, Civil society, Economic reform, General markets (FMR: Farmers Market), International trade | 1 Comment »

Korean volatility affecting DPRK food prices and exchange rate

Wednesday, December 15th, 2010

According to the Daily NK:

North Korea’s attack on Yeonpyeong Island on November 23rd has caused a spate of rice price instability in the markets. Even though it is December, rice is now selling for around 1,300 won per kilo, as much as 500 won more than it was just one month ago.

This is contra to the normal trend, which is that the price of food generally declines because farmers on collective farms get food distribution from the state at this time.

A source from North Hamkyung Province explained the details to The Daily NK yesterday, saying, “The price of rice, which was between 800 and 900 won in mid-November, started going up on around the 23rd, and is now over 1,300 won.“

“People have been taken aback by the soaring food prices,” he added

According to the source, on the 8th and 9th the rice price in Hoiryeong Market apparently hit 1,900 won, the highest this year.

This phenomenon, which is rare but not unprecedented, seems to have been caused because the North Korean authorities are trying to raise domestic and international tension on the Korean Peninsula.

An example of this can be seen in a statement released by a North Korean “social organization”, Chosun Peace Protection National Committee, on the 11th, in which it proclaimed, “Our military and the people are both prepared for either expanded skirmishes or all-out war.”

Elsewhere, people’s unit lectures over the last few weeks have focused on asserting phrases like this one, heard in a northern provincial city lecture, “Since the current situation is extremely tense, you have to live lives appropriate to that tension.”

This atmosphere naturally has spilled over into the markets, where food wholesalers and the “donju,” holders of large amounts of capital, have reacted negatively, according to the source, who explained, “The latest mood is similar to the time when the authorities declared a ‘Quasi-war Footing’ in 1993. As the atmosphere gets more serious, money holders begin to obtain and cling onto foreign currency, so foreign currency dealing and circulation volumes fall and food trade is choked off. Therefore, rice prices soar.”

In additional, military tensions between North and South are having an influence on trade between the North and China, so the amount of Yuan flowing into North Korea has also shrunk, which is another cause of rising currency exchange rates and therefore domestic rice prices.

The source said, “People are saying that this happened because of the gunfight between the North and South,” going on, “For this troubling rumor that a war could break out, smuggling volumes between North Korea and China have also shrunk.”

Although rice has now settled back to 1300 won from its high of 1900 won, the source said many people are still concerned for the winter season.

“Since the 10th, the Yuan has gone down to 330 or 340 won, so the rice price has dropped to around 1,300 won accordingly,” the source said. “But we are worried about whether or not we can afford to eat enough corn porridge this winter.”

The Daily NK has also conducted an additional investigation of currency rates and rice prices in Pyongyang, Shinuiju and Hyesan, comparing December 7th to 13th with November 24th to 30th, to check the effect of this trend across the country.

In the North Korean capital, one U.S. dollar has increased from 1,400 won to 1,750 won, while rice has gone from 750 won to 1,250 won per kilo.

In Shinuiju, meanwhile, both foreign currency exchange rates and rice prices are marginally worse again, moving from 1,450 to 1,800 won per dollar and from 800 won to 1,300 won per kilo respectively, while in Hyesan, the dollar exchange rate mirrored that in Pyongyang, but rice had been hardest hit, going from 900 won to 1,350 won.

Additionally, in Shinuiju on the 9th one Yuan had soared to 420 won, near the level of the period before the redenomination.

This December 2010 price trend is occurring for the third time since 2000. The first was in December, 2005 when the authorities stopped all food trade because the state apparently planned to resume full food distribution. Thereafter, rice prices almost doubled. The second time was in December last year, a phenomenon caused by a measure shutting down the market following the currency redenomination.

According to the Korea Times:

North Korean merchants are exchanging their local currency en masse as war jitters in the wake of Pyongyang’s attack on Yeonpyeong Island have stoked fears that the won may lose its value in the case of war, a report said.

According to North Korea Intellectuals Solidarity (NKIS), a Seoul-based NGO comprised of defectors with lines into the North, currency exchange rates have skyrocketed since the Nov. 23 incident. One hundred yuan, which before the shelling went for 2,000 won, is now worth 35,000 won, NKIS said in a report released Sunday.

“Merchants have heard rumors that if there is war, North Korean bills will become worthless scraps of paper,” NKIS quoted a source as saying, causing traders to exchange their won while they can.

Price of daily goods have also skyrocketed, the report said, with rice jumping from 900 won per kilogram to 1,600 won. Corn climbed from 4,000 won per kilogram to 6,000 won, it said.

The source said the soaring prices have been caused by jitters in the market over the heightened tensions in the wake of the Nov. 23 attack, saying the North’s military has been in a “quasi state of war” since the incident.

The rumors that the won will lose its value in case of a war have slowed market activities as merchants have raised prices and are waiting to see if further military action is on the cards.

Traders in China, from who markets in the North secure much of their goods, have also become reluctant to make transactions involving North Korean currency and are trading what won they have, the source said.

The price jump comes on the heels of reportedly enormous inflation caused by a botched currency reform last year.

The regime redenominated banknotes at a ratio of 100:1 in November last year in a move to squelch a bourgeoning private sector. But the move led to runaway inflation as the price soared by some forty times within the year, according to reports.

The U.N. estimated last month that some 5 million North Koreans will face food shortages this year due to lack of staple grains, while the economy is believed to be suffering heavily from international sanctions imposed for the regime’s missile and nuclear tests.

Meanwhile, Pyongyang, which claims Seoul instigated the shelling by firing into its territory during a military drill, continued to threaten the South over the weekend, saying, “The army and the people of the DPRK are ready for both an escalation and an all-out war.”

According to the Institute for Far Eastern Studies:

After North Korea rained artillery onto Yeonpyeong Island, military tensions have continued to grow, impacting the price of rice and the currency exchange rate in the North”s traditional markets. On December 13, NK Intellectual Solidarity reported that this has shaken the livelihoods on North Korean people. According to the group, rice has shot up 77 percent, from 900 won to 1600 won per kilogram, since the November 23 attack. The price of corn has also gone up by 50 percent, to 600 won per kilogram. At the same time, the exchange rate for Chinese yuan has risen, at least in the market in Hyeryong, from 220 to 350 won per yuan, a 59 percent increase.

Daily NK has also reported that post-Yeonpyeong food price increases have been significant, and as the Autumn harvest comes to a close in December, smaller rations to those working on collective farms is expected. A contact in North Hamgyong Province reported, “Rice prices that were 800-900 won [ per kilogram] in mid-November shot up to 1100 won and have recently risen to 1300 won…people are reeling at the sudden rise in prices.” According to the source, rice hit a high of 1900 won in the Hyeryong market around December 8-9.

The very first to reflect military tensions between the to Koreas were money handlers and wholesalers. A source in North Korea compared today”s atmosphere with that experienced in 1993, and explained that as people”s concerns about war increase, money traders become more conservative, tightening up the exchange of currency and therefore slowing the entire wholesale market, driving up prices. A survey by DailyNK from December 7-13 revealed that the exchange rate in Pyongyang rose from 1400 to 1750 won between November 24 and the end of the month, while the price of rice rose from 750 won to 1250 won per kilogram over the same period. In Sinuiji, the exchange rate rose from 1450 to 1800 won, while rice costs went up from 800 to 1300 won per kilogram. Hyesan showed similar trends, with the exchange rate rising from 1400 to 1800 won and rice rising from 900 to 1350 won per kilogram.

While food prices have fallen from their peak after the Yeonpyeong shelling, they are still high enough to cause significant difficulties for the average North Korean. Price hikes seen recently are three times as severe as those seen from 2000-2010, including the huge jump seen in 2005 when authorities attempted to reintroduce the central rationing system. Combined with last year”s failed currency reform attempt, the latest price hikes have severely strained the livelihoods of most North Koreans.

UPDATE: From the Institute for Far Eastern Studies

DPRK prices, exchange rate, skyrocket after shelling
Institute for Far Eastern Studies (IFES)
NK Brief No. 10-12-15
12/15/2010

After North Korea rained artillery onto Yeonpyeong Island, military tensions have continued to grow, impacting the price of rice and the currency exchange rate in the North”s traditional markets. On December 13, NK Intellectual Solidarity reported that this has shaken the livelihoods on North Korean people. According to the group, rice has shot up 77 percent, from 900 won to 1600 won per kilogram, since the November 23 attack. The price of corn has also gone up by 50 percent, to 600 won per kilogram. At the same time, the exchange rate for Chinese yuan has risen, at least in the market in Hyeryong, from 220 to 350 won per yuan, a 59 percent increase.

Daily NK has also reported that post-Yeonpyeong food price increases have been significant, and as the Autumn harvest comes to a close in December, smaller rations to those working on collective farms is expected. A contact in North Hamgyong Province reported, “Rice prices that were 800-900 won [ per kilogram] in mid-November shot up to 1100 won and have recently risen to 1300 won…people are reeling at the sudden rise in prices.” According to the source, rice hit a high of 1900 won in the Hyeryong market around December 8-9.

The very first to reflect military tensions between the to Koreas were money handlers and wholesalers. A source in North Korea compared today”s atmosphere with that experienced in 1993, and explained that as people”s concerns about war increase, money traders become more conservative, tightening up the exchange of currency and therefore slowing the entire wholesale market, driving up prices. A survey by DailyNK from December 7-13 revealed that the exchange rate in Pyongyang rose from 1400 to 1750 won between November 24 and the end of the month, while the price of rice rose from 750 won to 1250 won per kilogram over the same period. In Sinuiji, the exchange rate rose from 1450 to 1800 won, while rice costs went up from 800 to 1300 won per kilogram. Hyesan showed similar trends, with the exchange rate rising from 1400 to 1800 won and rice rising from 900 to 1350 won per kilogram.

While food prices have fallen from their peak after the Yeonpyeong shelling, they are still high enough to cause significant difficulties for the average North Korean. Price hikes seen recently are three times as severe as those seen from 2000-2010, including the huge jump seen in 2005 when authorities attempted to reintroduce the central rationing system. Combined with last year”s failed currency reform attempt, the latest price hikes have severely strained the livelihoods of most North Koreans.

Read the full stories here:
Tensions Driving Rice Price and Exchange Rate Hikes
Daily NK
Yoo Gwan Hee
12/14/2010

DPRK prices, exchange rate skyrocket after shelling
Institute for Far Eastern Studies (IFES)
NK Brief No. 10-12-15
12/15/2010

‘Yeonpyeong shelling causes inflation in Pyongyang’
Korea Times
Kim Young-jin
12/13/2010

Posted in Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Price liberalization | Comments Closed

Rice price up 40-fold in last year

Thursday, December 2nd, 2010

According ot the Korea Herald:

The price of rice in North Korea has soared nearly 40-fold in the year after the country’s botched currency reform.

Rice is now traded at around 900 North Korean won per kilogram in Pyongyang’s markets, according to online media outlet Daily NK. This is up 3,990 percent from 22 won late November last year in the newly introduced currency.

The North knocked two zeros off the face value of its old currency on Nov. 30 last year, exchanging 100-won bills for new 1-won notes. Therefore the price of a kilogram of rice, which was 2,200 won in the old currency, was redenominated to 22 won.

Under the currency reform plan, a 100-won note in the new currency should have the exchangeable value of a 10,000-won bill in the old currency. However, due to 4,000 percent inflation, the new 100-won note is now only worth 250 won in the old currency.

The price of rice in North Korea is deemed the benchmark of all prices in commercial trade.

“The apparent purpose of the North Korean currency reform was to reduce the amount of money in the markets to stabilize prices, but it failed to achieve this due to an absolute lack of commodity supplies,” said Cho Myung-chul, a senior fellow at the Korea Institute for International Economic Policy.

“The fact that rice prices jumped 4,000 percent based on the currency’s exchangeable value shows that the effect of the 100-fold revaluation has mostly disappeared.”

After major markets in the reclusive state were shut down in mid-January this year, rice prices in Pyongyang soared, hitting 1,300 won per kilo in early March. They dropped to the 400-won range in May as markets began to function again, but soared over the 1,000-won mark in August due to an exchange rate hike and damage caused by heavy rains.

When the North redenominated its currency, it placed a cap on the amount of money that could be converted per person, telling people to deposit the rest in state-run banks.

The measure, which was aimed at crippling the growing merchant class and reasserting control over market activities, tightened the distribution of food and stirred anti-regime sentiment.

This Daily NK story asserts that the average salary of a general worker is around 1,500 won a month, and it is not paid regularly.

Read the full story here:
N.K. rice price soars nearly 40-fold in a year
Korea Herald
Kim So-hyun
11/20/2010

Posted in Agriculture, Black markets, Finance, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Labor conditions/wages, Price liberalization | Comments Closed

Prices and exchange rates increase following currency re-denomination

Thursday, October 28th, 2010

According to the Korea Times:

In North Korea, the price of rice and currency exchange rates have been on a roller coaster ride since the failed currency reevaluation last November, a ruling party lawmaker said Thursday.

In a booklet, titled “Collection of National Assembly’s Annual Audit: North Korea 2010,” Rep. Yoon Sang-hyun of the Grand National Party claimed that creating a thriving market is the key to resolving economic problems in the Stalinist society.

North Korea watchers said the presence of a free market was the result of the communist party’s halt of the public food distribution system after the devastating famine hit the impoverished economy in the wake of massive floods in the mid 1990s.

The lawmaker released the booklet based on data and reports from the Ministry of Unification.

According to him, the price of one kilogram of rice was approximately 20 won before the currency reform. But it skyrocketed after that and hit 1,000 won early this year.

The range in the price of rice in late July reached between 1,300 and 1,500 won.

Along with rice prices, Yoon said foreign exchange rates were on a volatile up and down fluctuation as well.

The exchange rate for the North Korean won against the U.S. dollar was 30 won per dollar. But the dollar rate was rapidly appreciated to 1,000 won per dollar this March and rose further to 1,300 won per dollar.

Citing a unification ministry’s report, Yoon said some 300 to 350 markets were open in the North and there are one or two markets for every country [sic: “county”].

North Korean authorities implemented the currency reform last year in order to repress the markets, but the failed results proved their bold miscalculations, he said.

Read the full story here:
Rice prices on a roller coaster ride in N. Korea
Korea Times
Kang Hyun-kyung
10/28/2010

Posted in Economic reform, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Price liberalization | Comments Closed

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