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Private sector real estate activity booming in the DPRK

Saturday, September 6th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-9-4-1
9/4/2008

Professional ‘housing trade mediators’ (real estate agents) facilitating less-than official housing transactions have emerged in North Korea, with a wide range of real estate opportunities popping up, including not only sales but even rooms rented out by the month.

An article titled “Chosun’s Real Estate Black Market’ in the monthly magazine, ‘Imjin River (rimjingang)’, detailed the current status of today’s real estate situation, including a description of the black market and issues involved with housing transactions in North Korea. Articles for the magazine are written by reporters inside North Korea gathering first hand information on the state of the North Korean society.

In North Korea, exchanging cash to obtain real estate is a highly illegal activity, but with an extreme shortage of housing and a growing divide between the rich and the poor, the demand for housing sales has grown sharply, leading to the development of the real estate black market.

In the North, when the government allocates houses, it issues a ‘Government Residence Permission Certificate’, allowing the resident to move in. This permit is not, strictly speaking, a certificate of ownership, but rather permission for use of a property, but since there is no expiration date on the permit, once it is issued it is, for all practical purposes, a property deed showing ownership.

Lately, according to the article, almost no one has been receiving residence certificates, and these days, it has become common for North Koreans seeking housing take their money to the black market and either directly or indirectly purchase housing. In addition, as the black market grows, so too, does the linkage of it with the ruling class.

On one hand, as these housing sales in North Korea are illegal, disputes and trouble continue to arise, but on the other hand, because of their illegality, the North Korean government has no official apparatus in place through which to resolve the issues.

Posted in Institute for Far Eastern Studies, Real estate, Rimjingang | 1 Comment »

DPRK-PRC trade shoots up 25%

Thursday, August 28th, 2008

Instutite for Far Eastern Studies (IFES)
NK Brief No. 08-8-28-1
8/28/2008

Recently published Chinese customs statistics reveal that trade between North Korea and China in the first half of 2008 was 1.151 billion USD, 25 percent higher than in the same period last year.

Exports were up 13.5 percent at 330 million USD, while imports grew by 31.1 percent to 820 million USD. This means that the trade deficit for this period, 491 million USD, was 44.1 percent greater than the first half of 2007.

Mining topped the list of North Korean export industries, with 118 million USD worth of ores exported to China making up 36.2 percent of all goods sent across the border. Exports included 71 million USD worth of fossil fuel, 39 million USD worth of steel, 30 million USD in clothing, and 9 million USD in aluminum. On the other hand, Chinese goods imported by the North included 302 million USD in fossil fuels, making up 36.9% of all imports. 68 million USD in machinery, 37 million USD in electronics, 30 million USD in food, and 30 million USD worth of vehicles (excluding trains) were also brought in.

Mining exports were up 69.4 percent over the first half of 2007, making up the largest part of the increase in exports. The rising international price on natural resources was a factor in the North’s increase in exports of iron ore. The 68.1 percent rise in the import of fossil fuels, on the other hand, made up the largest share of the increase in imports, and this can also be attributed to the increase in global fuel prices.

Posted in Institute for Far Eastern Studies, International trade, Light Industry, Manufacturing, Mining/Minerals, Statistics, Trade Statistics | 1 Comment »

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

DPRK food production seen as a political issue

Friday, August 8th, 2008

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

According to Choi Hyun-soo, vice director of the DPRK Department of Agriculture, “The issue of increasing agricultural production is related to the serious political issue of the fate of the construction of a strong and prosperous socialist nation, and even moreso, the fate of our style of socialism,” rather than simply an issue of economic affairs.

In an interview published in the latest issue (July 24) of the DPRK Cabinet publication, “Democratic Chosun”, Vice Director Choi stressed that several years of natural disasters had prevented last year’s grain production from reaching a satisfactory level, making increased grain production this year an even more important issue. While Choi recognized the impact of the natural disasters, he also blamed the “villainous isolation and oppression machinations of the imperialists” for causing the North’s scant grain production. He also pointed out that the sudden jump in rice, corn, wheat and other grain prices around the world has been cause for concern, and “these days, there are no countries offering food or in a position to provide it.”

He went on to state, “If countermeasures to prevent damage during the monsoon season cannot be implemented, farmland and crops could be severely damaged,” and the lack of heavy rains is no reason for complacency, but rather, efforts to prevent flood damage need to continue. The (North) Korean Central Broadcasting Station also reported on July 24, “Good agricultural cultivation is an important political task,” and, “Good agricultural cultivation and easing of the eating problem is precisely the utmost important matter for the success of socialism and the protection of our system and ideology.”

Posted in Agriculture, Cabinet, Domestic publication, Institute for Far Eastern Studies, Ministry of Agriculture | Comments Closed

DPRK tightening the reigns in order to secure public finance

Tuesday, August 5th, 2008

Institute for Far Eastern Studies (IFES)
(NK Brief No. 08-8-5-1)
8/5/2008

The latest edition (2008, no. 2) of North Korea’s quarterly economic publication “Economic Research” urged for further regulation of public finance in order to ensure that the public finances necessary for the construction of an ‘Economically Powerful State’ are available.

The journal, which was brought into South Korea on July 29, contained an article titled, “Further Strengthening of Public Finance Regulations at the Present Time [will serve as] Important Collateral to Completely Guarantee the Capital Necessary for Socialist Economic Construction.” In the article, it stressed, “Public finance regulation is one form of state regulation through the monetary sector,” and, “Public financial security for the construction of an economically powerful state varies considerably according to how regulation and distribution functions are carried out.

North Korea has set the goal of construction of a ‘Strong and Prosperous State (Ideologically, Militarily, and Economically Powerful State) by 2012, the 100th anniversary of the birth of the country’s founder, Kim Il Sung. In light of that goal, Pyongyang has prioritized economic prosperity for this year, the 60th anniversary of the DPRK government, calling for a ‘full-scale offensive’ by all the people of the North.

“Economic Research” stresses the following three points for strengthening public finance: 1) further strengthening the coordination of the state’s guidance for economic enterprises, 2) ensuring the utility of economic enterprises, and, most importantly, 3) strictly establishing public finance regulations.

In particular, the establishment of public finance regulations was defined as, “guaranteeing efficient use of capital through the protection and endless expansion of the country’s public financial resources, as well as the complete protection of the capital necessary for state and business operations and efficient elimination of all current misappropriation.” This type of statement makes it appear as if diversion and misappropriation of North Korean finances are regular occurrences.

The journal called for strengthening of management and organization for the financial offices of public finance centers, businesses, and organizations in order to effectively enforce public finance regulations, and for the creation of auditing committees at enterprises and organizations to ensure this takes place.

Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Banking, Domestic publication, Economic reform, Finance, Fiscal & monetary policy, Illicit activities, Institute for Far Eastern Studies | Comments Closed

DPRK Cabinet adopts ‘Border region management provision’

Tuesday, July 22nd, 2008

Institute for Far East Studies (IFES)
NK Brief No. 08-7-22-1
7/22/2008

On July 18, the North Korean Cabinet publication, “Democratic Choson’, revealed that the cabinet had recently adopted the ‘Border Bridge Trade Complex Management Activities Provision’.

According to the newspaper, the provision spells out to whom the rules and regulations must be applied regarding the orders and management activities of the border bridge trade complex. In addition, “by being adopted, the provision firmly creates regulations on foreign economic activities that cross over border bridges and has prepared the legal support for unceasing improvements of the border bridge trade complex’s management activities.”

North Korea relies on border trade with Chinese areas such as the city of Dandong, in Liaoning Province, and the Yanbian Korean Autonomous Prefecture, as cross-border trade shot up to over 200 million USD last year.

Posted in Cabinet, Domestic publication, Institute for Far Eastern Studies, International trade, Trade Statistics | Comments Closed

DPRK bolsters social security laws

Monday, July 21st, 2008

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

Recent transformations in the North Korean economy and society have led the government to draft policies to link the social welfare matrix to the social security law. The ‘Democratic Chosun’, a publication of the Central Peoples’ Standing Committee and the Cabinet, has on five occasions (April 3 and 4, May 14, 16, and 23, 2008) run articles titled, “Regarding the Social Security Law,” explaining recent changes to the law and its affects on the North’s social welfare.

This law contains six sections and 49 articles, the purpose of which is to strictly establish the structure and methodology of the nation’s social security system, and to protect the health of the people while providing them with secure and happy lives. Details of the law have not yet been made available.

North Korea established the National Social Security Law on August 30, 1951, although it was not actually enforced until after the April 14, 1978 Socialist Labor Law was passed. North Korea’s social security system is a means with which to control the country’s socialist economy, and also acts to restrict the lives of the people, as well. From when the September 8, 1948 Constitution was passed right up until today, North Korea has provided its people with social insurance and social security systems. Society’s sick, feeble, and handicapped receive treatment assistance or material support from the social insurance system.

By looking at past transitioning countries, one can see that transforming systems and quickly changing social and economic structures lead to linking of social security with social welfare in order to protect the society’s weak. In North Korea, the passing of the July 1, 2002 Economic Management Reform Measures and other sudden changes in the social and economic environments raised concerns regarding the issue of protecting the country’s most vulnerable. Combined with the North’s food shortages, the protection of the society’s elderly, children, pregnant, and other vulnerable elements has become a special issue of concern for North Korean authorities.

NKeconWatch commentary:
This article surprised me. Aside from this post, IFES updates are pretty well researched. Does anyone really believe that the dejure intent and defacto incidence of legislation in North Korea are the same? You would have to be completely ignorant of life in any communist country to actually believe the statement, “From when the September 8, 1948 Constitution was passed right up until today, North Korea has provided its people with social insurance and social security systems. Society’s sick, feeble, and handicapped receive treatment assistance or material support from the social insurance system.”

Not only is health care under-supplied in the DPRK, it is also not provided free-of-charge. I am told by people who have had to obtain health care in the DPRK that you generally have to pay bribes to get access. This was the reality of life in most communist countries. Here is a much better analysis of the supply of health care in the DPRK.

As for the concern of North Korean authorities to maintain a social safety net during a difficult economic transition, this is no doubt true for a number of DPRK policy makers. But the people who actually make decisions are still siding with security hawks who refuse to give aid workers and NGOs the freedom they need to effectively help people.

Posted in 1978 Socialist Labor Law, Domestic publication, Health care, Institute for Far Eastern Studies | Comments Closed

Kim Jong il steps up economic activities

Wednesday, July 2nd, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-7-29-1
7/29/2008

Of North Korean leader Kim Jong Il’s public appearances during the first half of the year, fully half of them were to military installations or other defense-related sites, making it the most frequented sector, but compared to previous years, the number of visits to sites related to the economy rose considerably.

According to North Korean media sources, from January through June, Kim Jong Il made a total of 49 public visits. Of these, 25 (51%) were to military facilities, while 15 (31%) were to factories, cooperative farms, and other sites related to the nation’s economy. 3 (6%) public appearances were meetings with foreign dignitaries, and 6 (12%) were to public performances and other events.

In January, Kim made five on-site visits to economically important areas, after which there was a lull until May, when Kim appeared at six sites, and then made another 4 economy-related visits in June. In July, Kim has already made three visits to Jangan and North Pyongan Provinces, showing up at production facilities in those areas.

Between January and July of 2007, Kim made only six visits to sites related to the economic sector, less than a third the number of visits this year. In fact, with only 19 site visits for all of 2007, Kim’s appearances in the first half of this year have almost surpassed last year’s total, which itself was an increase over the 16 visits made in 2006.

The first public appearance made by Kim Jong Il in 2008 was at the Yaesung River Power Plant construction site on January 6, and was followed up by an appearance on January 21 the ‘18th National Program Contest and Exhibition’, emphasizing the government’s drive to resolve economic difficulties.

In the same month, Kim Jong Il visited a poultry and pork processing plant, a mushroom plant, a food processing facility, a rabbit breeding farm, and a youth mine, directly inspecting sites related to the lives and livelihoods of the people, appearing to emphasize the slogan announced in this year’s New Year’s Joint Declaration, “Prioritization of the People’s Lives”. Kim’s ‘economic walk’ was seemingly put on hold by a flurry of negotiations between the United States and North Korea regarding the North’s declaration of its nuclear programs and the attempt by the new South Korean government’s revamped policy towards North Korea between February and April, but then regained traction in May, with a visit on the 4th to a mountain orchard in Kangwon Province.

This year, Kim Jong Il’s on-site instructions at facilities related to building the economy and improving the lives of the people appear to be focused on stressing the need to resolve food shortages and ensure that everyone is fed.

Posted in Economic reform, Institute for Far Eastern Studies, Military, Political economy | Comments Closed

DPRK embraces comparative advantage to strenghten foreign economic relations

Tuesday, June 17th, 2008

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

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

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

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

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

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

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

Posted in Domestic publication, Institute for Far Eastern Studies, International trade, South-North Korean Economic Cooperation Forum | Comments Closed

Recent rice prices skyrocket in DPRK

Friday, June 6th, 2008

Institute for Far Eastern Studies (IFES)
5/6/2008

Even North Korea’s North and South Hwanghae Provinces, an area known as the DPRK’s ‘Ricebowl’, now appears to be suffering severe rice shortages, with prices at the end of last month hitting 4,000~4,500 DPRK Won per kg, more than three times the cost of a kilogram of rice last February, according to a June 5 report by Good Friends, a human rights group focusing its efforts on North Korea.

According to Good Friends’ latest newsletter, prices across South Hwanghae Province all rose to 4,500 DPRK Won on May 30, and at the same time, prices in South Hwanghae rose to over 4,000 DPRK Won per kg. In Sariwon, North Hwanghae Province, rice was 1,350 DPRK Won/kg in February, rose to 1,700 DPRK Won/kg in March, climbed again to 2,200 DPRK Won/kg in April, then shot up to 2,500 DPRK Won/kg on the 10 th of last month, 3,500 DPRK Won on the 25 th, and 4,200 DPRK Won on the 30 th. As the average monthly wage of a North Korean laborer is thought to be around 3,000 DPRK Won, rice selling at 4,000 DPRK Won/kg is well out of reach.

Corn prices in the Sariwon region at the end of last month was 1,950 DPRK Won/kg, 270 percent higher than the 720 Won prices seen in February, and the newsletter reported that prices throughout North and South Hwanghae Province were generally 1,950-2000 DPRK Won/kg. In particular, the newsletter stressed that at one military base in the Hwanghae area, rations have run so short that officers with children under the age of 12 will be ordered to send their families to their parents’ or in-law’s house until rations are reissued in November.

The newsletter drives the point home by pointing out, “These officers that send their families will take their meals on base…this is the first time since the ‘arduous march’ that there has been an order to send families [away] because of this kind of ration shortage.”

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

North Korean Economy Watch