The 8th WPK congress announcement: strengthened economic control to come?

August 19th, 2020

By Benjamin Katzeff Silberstein

So, the news are out: the central committee of the WPK has formally decided that the Party will hold its 8th Congress in January 2021:

8th Congress of WPK to Be Convened
Pyongyang, August 20 (KCNA) — A decision of the 6th Plenary Meeting of the 7th Central Committee of the Workers’ Party of Korea was made on August 19.
The decision is as follows:
Our Party and people are carrying out the historical task set forth at the Seventh Congress of the Workers’ Party of Korea while breaking through head-on all the barriers to our advance by organizing and launching an arduous revolutionary struggle.

Through this indomitable struggle for implementing the decision made at the Seventh Congress of the WPK the dignity and position of our state has been remarkably raised, the single-minded unity of the Party and the people further consolidated and a great revolutionary turn made in the building of the Party and its overall activities.

On the other hand, economy was not improved in the face of the sustaining severe internal and external situations and unexpected manifold challenges, thereby planned attainment of the goals for improving the national economy have been seriously delayed and the people’s living standard not been improved remarkably.

The plenary meeting, after analyzing and reviewing the experience and lessons from the work of the past five years for building a powerful socialist country, decided to convene the Eighth Congress of the WPK as follows to set forth a correct line of struggle and strategic and tactical policies on the basis of the new requirements of our developing revolution and the prevailing situation:

1. The Eighth Congress of the WPK will be convened in January, Juche 110(2021).
2. The agendas of the Eighth Congress of the WPK are as follows:
1) Review of the work of the Central Committee of the WPK
2) Review of the work of the Central Auditing Commission of the WPK
3) On revising the rules of the WPK
4) Election of the leadership organ of the WPK Central Committee
3. One delegate with the right to vote to the Congress will be appointed among every 1 300 Party members and one delegate with the right to speak among every 1 300 candidate Party members. -0-

Kim Jong-un’s speech, however, was far more interesting than the announcement of these agenda items. In my opinion, there are hints in his speech that the Party will continue down the road of strengthening state and Party control over the economy. That doesn’t necessarily spell a return to central planning, but it does mean more restrictions and stronger demands that enterprises and other economic actors adhere to state “goalposts”; perhaps targets of production, and sectors of priority. More like a developmental state than a Stalinist command economy, at least in theory.

Look, for example, at the following two paragraphs from the summary of his speech (my emphasis):

Calling for regularly convening the congresses of the Party, the supreme guidance organ of the Party, in order to confirm the line, strategic and tactical measures for steering the development of the times and the revolution and adjust and reinforce the leadership body for guaranteeing their execution, he advanced the important guidelines for the operation of the congress.

And:

The Supreme Leader stressed the need for all the sectors and units including the Party organizations at all levels, power organs and organs of the armed forces to regularly in time sum up the results of the work so as not to deviate from the implementation of the Party’s basic lines, policies and decisions. He also said that they should encourage and develop good successes, overcome shortcomings and take rectification measures at the double and thus achieve new progress in advancing the revolution and construction and in strengthening the Party.

This fits well with the simultaneous announcement of another five-year plan for economic development. This also doesn’t mark a return to central planning, necessarily, but rather, the state asserting its right to set forth the main guidelines of economic development. The last one, adopted in 2016, was subsequently abandoned, and we should also not expect this coming strategy to be entirely written in stone.

The agenda item about the central auditing commission is also interesting. In these contexts, auditing often entails the state scrutinizing the books of various organs, looking for off-the-books resources and other ways to bring in more cash to the state.

An agenda item for the central auditing commission is nothing unique in itself, but substantially, it may relate to the current push of the state to take in more resources from wherever they can be found.

Over the past couple of years or so, as its funds have run increasingly low, the state has been pushing private and semi-private economic actors to hand over more of their resources to the government. Strengthening auditing practices may be a way of institutionalizing this push more regarding finances related to the Party.

(Update 20/8/20: I clarified the text somewhat above about the central auditing commission after this came up in a twitter discussion.)

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Posted in Economic Development Plans, Planning and Fiscal Affairs (KWP), Political economy | Comments Closed

What economic issues will the WPK politburo discuss?

August 19th, 2020

By Benjamin Katzeff Silberstein

The WPK politburo is meeting (or already met?) Wednesday August 19th, today, to discuss economic and military issues of “crucial significance in developing the Korean revolution and increasing the fighting efficiency of the party.”

At the present time of writing, it has not been reported or hinted at what these issues might be. I personally would not be surprised if perhaps another struggle campaign is afoot. “Battles” and the like for harvests and overall economic production are common in North Korea, as they were in other communist countries.

This essentially entails people having to take hours and hours after work to go “volunteer” at fields, construction sites and the like. It’s an easy, blanket solution to economic problems. They of course solve nothing in the long run, but may push a bit of extra production in a situation where the regime has few immediate alternatives.

At this point, speculation is quite useless in any case. Soon we will probably know more about what these issues are.

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North Korea’s summer floods, 2020

August 17th, 2020

By: Benjamin Katzeff Silberstein

Flooding has been sweeping across North Korea for the past few weeks. As has been usual for the past few years, state media has been very forthcoming in reporting the damage. At least partially, one might suspect this forthrightness is directed to an international audience, not least in China, to signal that North Korea hopes for aid. (Quietly, of course, behind the scenes, because officially, the country doesn’t want it.)

First and foremost, however, the target audience is – as usual – domestic, and the state seeks to reassure the people that the leadership is always watching out for them. Here’s the Rodong coverage of Kim Jong-un’s trip to a flood-damaged area:

Kim Jong Un, chairman of the Workers’ Party of Korea, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the armed forces of the DPRK, inspected Taechong-ri Area of Unpha County, North Hwanghae Province hit by flood.

Due to several consecutive days of torrential rain and rainstorm recently caused by the seasonal rainy front, the waterway levee gave way in the area of Taechong-ri of Unpha County, leaving more than 730 single-floored houses and 600-odd hectares of rice field inundated and 179 blocks of dwelling houses destroyed.

After hearing the report on the situation of the Taechong-ri area of Unpha County where lots of dwelling houses and a large area of arable land were submerged, the Supreme Leader personally went to the spot to learn about the situation and clarified tasks and ways in detail for the recovery of the damaged area.

Saying that he was really relieved to learn that there was no casualty as all the residents of Unpha County were evacuated to the safe area in advance, he called on leading organs in the county including Party and power organs, working people’s organizations and public security organs to responsibly conduct the work of putting up the residents who lost their homes at offices including those at the Party committee and people’s committee of the county, public buildings and separate houses, to stabilize their living and comfort them.

He ordered the relevant field to submit a document on supplying every household in the afflicted area with the reserve food grain of the chairman of the State Affairs Commission.

It is of priority importance to quickly supply sleeping materials, daily commodities, medicines and other necessities to the flood-affected people to stabilize their living as early as possible, he said, entrusting this task entirely to the departments of the Party Central Committee and families of its officials.

He gave an order to organize the flood damage rehabilitation headquarters with cadres of the relevant departments of the Party Central Committee and the Ministry of the People’s Armed Forces, and instructed the headquarters to report to him after correctly calculating the materials and forces needed for the rehabilitation, while sizing up the flood damage on the spot for starters.

The central designing force should be sent to newly build 800 model houses in the farm village of Unpha County hit by the flood and the project be completed at an earliest date possible and on the highest level, he said.

Saying he decided to mobilize the people’s army for the rehabilitation again, he ordered the people’s army to form a necessary force and urgently deploy it and to give precedence to the arrangement of the wrecked houses, roads and the zones with the people of the county.

Stressing the importance to take measures to ensure materials such as cement necessary for the rehabilitation, he gave an instruction to use the strategic reserve supplies of the chairman of the State Affairs Commission to meet the calculated amount.

He appealed to the Cabinet, the State Planning Commission, ministries and national institutions to actively cooperate in the rehabilitation of the flood-hit Unpha County, well aware of the Party’s intention.

(Source: Political News Team, “Supreme Leader Kim Jong Un Inspects Flood-Damaged Area in North Hwanghae Province,” Rodong Sinmun, August 7th, 2020.) 

Indeed, damage has been quite bad, as Washington Post reports here, but it’s not clear as of yet how it will add up in comparison with previous years:

The International Federation of the Red Cross said the floods have left at least 22 people dead and four missing, citing the Democratic People’s Republic of Korea Red Cross and the country’s State Committee for Emergency and Disaster Management.

The disaster adds to a troubling humanitarian situation in North Korea, whose weak economy has been further battered by the coronavirus pandemic.

The official Korea Central News Agency (KCNA) said at least 16,680 houses and 630 public buildings have been destroyed or flooded during the monsoon, with nearly 100,000 acres of crops damaged and many roads, bridges and railway tracks broken. A dam at a power station also gave way, it said.

(Source: Simon Denyer, “North Korea floods kill 22, approach nuclear reactor — but Kim doesn’t want help,” Washington Post, August 14th, 2020.)

Daily NK cites internal documents claiming that over 40 percent of terraced corn fields in North Hamgyong have flooded away. They also report, unsurprisingly, that the county visited by Kim personally is getting a disproportionate amount of attention and help:

Monsoon rains and strong winds have led to substantial damage in the grain-producing regions of North Korea’s west coast, leading to predictions that the country will face a poor harvest this year, Daily NK has learned.

“North Hamgyong Province is the center of the country’s corn production, but an [internal] statistical report on Aug. 3 said that 42% of terraced cornfields and farmland near rivers had been either washed away or flooded,” a source in North Hamgyong Province told Daily NK on Monday. “The report did not include data about farms tilled by individual farmers. Including those farms would mean that the actual damage [to farmland] is even greater.”

Regarding the situation in nearby South Hamgyong Province, the source told Daily NK that “South Hamgyong Province is the home of rice [production], but midway through the monsoon season approximately 30% of farmland has already been flooded.”

According to the source, the harvest this year in the region was actually better than last year until the start of the monsoon season. He pointed out, however, that “rice plants became inundated with water just as they were being fertilized, so there is talk that farmers will barely be able to meet the government’s autumn quota for military rice [rice going to the military].”

Farms in the coastal areas of South Pyongan Province have also suffered from flooding and crop damage, a source in the region said.

“There has been substantial damage to crops, with monsoon rains flooding fields in several areas near the central west coast and strong winds blowing over corn plants that were just beginning to mature,” the source said. “Farmland stretching across thousands of jongbo in Jungsan and Pyongwon have been damaged by salt water, which means we can’t expect normal harvest levels this year.”

One jongbo is equivalent to around 9,917 square meters.

Areas near Nampo, including Onchon and Gangso, were hit by monsoon rains and strong gales that felled telephone poles and roadside trees, according to the source, who also reported that dozens of farm houses have collapsed and their now-homeless former occupants have been evacuated to other structures on farms, including cultural halls and rooms used by work units.

RAPID CLEAN UP EFFORTS IN UNPA COUNTY

After North Korean leader Kim Jong Un visited North Hamgyong Province’s Unpa County to see the devastation wrought by a dyke that burst open, efforts to cleanup the damage are rapidly underway, a source in the area told Daily NK.

“The Supreme Leader came to inspect [the damage] in Unpa County personally, and the province has dispatched a storm trooper contingent made up of 300 party members along with another storm trooper unit made up of around 500 Kimsungilist-Kimjongilist Youth League members,” the source said.

“The authorities have also mobilized workers from various businesses in the province while [Unpa County] farmers, along with village and district-level inminban [North Korea’s lowest administrative unit], are working to process barren soil, build embankments, restore farmland and repair people’s homes,” he added.

People who have lost their homes in the area have been housed in cultural halls, guest houses, local inns or the houses of friends; however, county authorities have forced many to engage in the cleanup efforts, according to the source.

The military has mobilized soldiers to the area, including 280 soldiers selected from units under the “August 15 Training Center” along with two battalions from the 25th Brigade under Bureau 7 (a military engineers unit). The battalions have reportedly brought along mechanized equipment for the cleanup efforts. The soldiers have set up waterproof tents and are living in the area while cleaning up the damage.

On Aug. 7, Rodong Sinmun and other state-run media reported that Kim Jong Un visited Unpa County and ordered the construction of a new farming village to accommodate 800 families, as well as the release of grain reserves and emergency supplies for victims and those performing relief work.

The source confirmed that the authorities had ordered the completion of housing blocks accommodating two families each by Nov. 10.

“Military units along with the storm trooper units made up of provincial party members and members of the Youth League will build the houses,” the source said. “Overall responsibility for the project is held by both the Cabinet’s vice premier and the North Hwanghae Province Party Committee Director, and progress reports will be sent to the Supreme Leader.”

AN UNPA COUNTY-FOCUSED RELIEF EFFORT

North Korea is also holding a nationwide campaign to raise funds for the relief work and the construction of new houses in Unpa County, according to the source.

“Even though the damage [by the monsoon rains] is not limited to Unpa County, inminban around the country have been told that they must offer assistance to the area by sending support packages for affected residents and soldiers engaged in construction work by Aug. 13,” the source told Daily NK.

While the required contribution differs by region, the figure is believed to be KPW 20,000 for each household in Pyongyang’s Mangyongdae District and KPW 10,000 or 2.5 kilograms of rice for each family in Kaechon, South Pyongan Province. Families in Sariwon, North Hwanghae Province, have been told to either contribute KPW 15,000 per household or provide labor in lieu of a monetary payment.

On Monday, Korea Central News Agency and other state-run media reported that vehicles carrying the reserve grain sent by Kim Jong Un had arrived in Unpa County. The article was accompanied by photos of residents welcoming the delivery.

“This [kind of delivery] happened once before during the General [Kim Jong Il]’s reign, but people were deeply moved because it is the first time they have been provided with such a gift under Kim Jong Un,” the source said, adding, “Those in other regions are envious.”

(Source: Ha Yoon Ah, “N. Korea moves to cleanup monsoon damage across grain-producing regions,” Daily NK, August 12th, 2020.)

Resources for relief efforts are scarce. As Radio Free Asia reports here (in Korean), enterprises as well as private citizens are being ordered to contribute.

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North Korea’s convenient but remarkable admission of likely Covid-19 case

July 26th, 2020

By: Benjamin Katzeff Silberstein

So, it finally happened: North Korea has officially admitted the suspected existence of a Covid-19 case in the country. State media claims the virus was brought over by a so-called re-defector, who first left for South Korea a few years ago only to return now, reportedly by swimming across the Imjin river. Some South Korean media speculation seems to confirm that a re-defection did happen, reportedly by someone swimming across the Imjin river, though none of this is confirmed. Here is the North Korean statement in full:

Pyongyang, July 26 (KCNA) — Amid the intensified anti-epidemic campaign for thoroughly checking the inroads of the world’s threatening pandemic, an emergency event happened in Kaesong City where a runaway who went to the south three years ago, a person who is suspected to have been infected with the vicious virus returned on July 19 after illegally crossing the demarcation line.

The anti-epidemic organization said that as an uncertain result was made from several medical check-ups of the secretion of that person’s upper respiratory organ and blood, the person was put under strict quarantine as a primary step and all the persons in Kaesong City who contacted that person and those who have been to the city in the last five days are being thoroughly investigated, given medical examination and put under quarantine.

The Political Bureau of the Central Committee of the Workers’ Party of Korea convened an emergency enlarged meeting in the office building of the Central Committee of the WPK on July 25 as regards the dangerous situation in Kaesong City that may lead to a deadly and destructive disaster.

Kim Jong Un, chairman of the WPK, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the armed forces of the DPRK, was present at the meeting.

Attending the meeting also were members and alternate members of the Political Bureau of the C.C., WPK.

Present there as observers were members of the Central Emergency Anti-epidemic Headquarters.

Party and administrative leading officials of the Cabinet, ministries and national institutions, members of the executive committees of provincial Party committees and senior officials of the leading institutions at provincial level were present in the video conferencing rooms as observers.

Upon authorization of the Political Bureau of the C.C., WPK, Supreme Leader Kim Jong Un presided over the meeting.

Despite the intense preventive anti-epidemic measures taken in all fields throughout the country and tight closure of all the channels for the last six months, there happened a critical situation in which the vicious virus could be said to have entered the country, the Supreme Leader said, adding that he took the preemptive measure of totally blocking Kaesong City and isolating each district and region from the other within July 24 afternoon just after receiving the report on it.

To tackle the present situation, he declared a state of emergency in the relevant area and clarified the determination of the Party Central Committee to shift from the state emergency anti-epidemic system to the maximum emergency system and issue a top-class alert.

He specified tasks for each sector to be immediately implemented by Party and working people’s organizations, power organs, public security and state security institutions, anti-epidemic and public health institutions.

The meeting unanimously adopted a decision of the Political Bureau of the Central Committee of the WPK on shifting from the state emergency anti-epidemic system to the maximum emergency system.

He instructed all the participants to immediately conduct follow-up organizational work to carry out the decision of the Political Bureau of the Party Central Committee in their fields and units, and party organizations at all levels and every field to ensure and guarantee the most correct implementation of the directions and assignments of the Party Central Committee with a sense of boundless responsibility, loyalty and devotion.

He underscored the need to thoroughly maintain tough organizational discipline and ensure the unity in action and thinking throughout the Party and society, to keep order by which everyone absolutely obeys and moves as one under the baton of the Emergency Anti-epidemic Headquarters and the need for party organizations at all levels to perfectly perform their role and duty.

Saying that everyone needs to face up to the reality of emergency, he appealed to all to overcome the present epidemic crisis by not losing the focus of thinking and action, practicing responsibility and devotion to be faithful and true to the leadership of the Party Central Committee, being rallied closer behind it so as to defend the welfare of the people and security of the country without fail.

The meeting sternly took up the issue of the loose guard performance in the frontline area in the relevant area where the runaway to the south occurred, and decided that the Central Military Commission of the WPK would get a report on the results of an intensive investigation of the military unit responsible for the runway case, administer a severe punishment and take necessary measures. -0-

(Source: “Supreme Leader Kim Jong Un Convenes Emergency Enlarged Meeting of Political Bureau of WPK Central Committee,” Korean Central News Agency, July 26th, 2020.)

This is of course makes for extremely convenient optics for the North Korean regime, and raises lots of questions.

First, to state the obvious: this would make for an extremely convenient way for the regime to admit the existence of Covid-19 in the country. I have written previously about how unlikely the regime claim of zero cases is. The message is: our anti-epidemic measures, such as closing the northern border, were flawless. But one case still slipped through the cracks. Having a first confirmed case coming in from the south relieves the regime of any awkwardness vis-a-vis China.

Second: this is all still very strange. How can the political and strategic cost be smaller of admitting a glitch in the southern frontline defenses? Look at the text in the statement: “loose guard performance in the frontline area” is not a small thing to admit. It’s far from unprecedented criticism, but still. What does it say about morale and readiness within the army that even at a time of relatively high tensions, “loose guard performance” can happen?

Third and relatedly: this is a lot of fuss for a suspected case. Kim Jong Un not only called an emergency politburo meeting, a major event in its own right. The state has also placed all of Kaesong under lockdown and required anyone that traveled to the city within the past five days to go into quarantine. Just imagine how many people in North Korea must be going around with symptoms that should cause suspicion of Covid-19. The sniffles and a subpar sense of smell and taste should be enough. And yet, this is the first time we’ve seen this sort of alarm.

Fourth: how was this detected, and why was this person specifically taken in for testing? Judging from the statement, he was able to slip back into North Korea undiscovered, only to proceed to move around freely in Kaesong and potentially spread the virus. Was he brought in for testing because he came in from South Korea, or because of specific symptoms? What happens to the undoubtedly more numerous arrivals from China – are they all placed under stringent quarantine? Kaesong is far less connected to the outside world than are other parts of North Korea. The chances of it spreading there but not in the north are…extremely, incredibly slim, at best.

In short, it’s very difficult to buy this as a credible explanation or excuse for a Covid-19 outbreak in North Korea. The virus has most likely been around for some time, perhaps something has now prompted the authorities to need to make an official admission. As always, all we can do is await more information and hope that some questions are answered.

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The Pyongyang General Hospital and Kim Jong Un’s “Benevolent Dictator” Economics

July 21st, 2020

By: Benjamin Katzeff Silberstein 

On Monday (July 20th), Kim Jong Un visited the construction site for the Pyongyang General Hospital and unleashed some rather scathing criticism against the management of the project. An excerpt from KCNA:

Noting that it is making a serious digression from the Party’s policy in supplying equipment and materials to go against the intention of the Party which initiated the construction for the people and mapped out its operation, he severely rebuked it for burdening the people by encouraging all kinds of “assistance”.

Saying that the construction coordination commission failed to solve all the problems in conformity with the Party’s policy line, he said in the strong terms that if such situation is left to go on, the noble plan and intention of the Party which initiated the glorious and worthwhile construction for the good of the people could be distorted and the image of the Party be tarnished.

He instructed the relevant departments of the Party Central Committee to investigate the performance of the construction coordination commission as a whole and replace all the officials responsible and make strict referral of them.

Pointing out that though the construction work of the hospital was being pushed ahead thanks to the patriotic zeal and devoted efforts of the builders […].

(Source: “Supreme Leader Kim Jong Un Gives Field Guidance to Pyongyang General Hospital under Construction,” Korean Central News Agency, July 20th, 2020.)

The Pyongyang General Hospital project was destined for hurdles from the very beginning, as this article explores. Kim has personally emphasized how central it is to finish hospital construction by the deadline of October 10th this year, when the Korean Worker’s Party will celebrate its 75th anniversary.

With such time pressure for construction, worksite conditions were always going to be problematic. The politically motivated deadline, moreover, increases the risk of shoddy construction work. Rather than serve the general public at large, the hospital, whenever finished, is likelier to cater to the sociopolitical elite who can pay their way and, perhaps, to medical tourism.

Kim’s criticism against construction officials, however, is about much more than the hospital construction project itself. It relates to the very structure of the North Korean system, and of communist economies in general. This sort of criticism really is a standard performance in a decades-old genre, where the supreme leader shows himself to be on the side of the people by pinning the blame for any problems and suffering among the population on lower-ranking officials.

Kim’s public criticism of the construction management officials is, in other words, not exceptional, but a standard mechanism and a feature of North Korea’s economic system. Much in North Korean governance may be subject to dynamic change, but the one constant is that the leader can hardly ever be at fault.* To hold this constant, someone else must be blamed when economic plans don’t go the way they should. Never mind that the leader often rules by directives that are often vague and given in off-the-cuff-statements, left to subordinates to interpret and implement as best as they can. Problems like this are almost inevitable in an economy like North Korea’s, still in structure very much a command economy despite significant relaxations over the past few decades.

Thus, when the Soviet Union’s industrialization plan didn’t proceed as intended, it had to be the fault of wreckers working for foreign powers. Stalin himself could never be at fault. In the same way, it cannot, by definition, be Kim’s fault that people are overburdened with requests for “assistance” to help build the hospital. Lower-level bureaucrats have to be the ones to blame, for overburdening the people, because the leader can never be associated with direct pain and suffering in people’s daily lives.

In fact, such “assistance” – often termed “voluntary” – is a mainstay of the North Korean economic system and pretty much has been ever since the beginning. Kim surely cannot have missed the pictures and news reports in his own state media about “active support” from “the people”, and different localities sending construction materials. This sort of “voluntary labor” to gather materials for state projects or work on construction sites is of course not voluntary at all, as staying away would be punishable.

It is a facet of everyday life in North Korea that doesn’t get nearly the attention it deserves, as it often takes up a substantial number of hours. It is also not a new phenomena. The North Korean state has always demanded such “voluntary” contributions from the people to make up for materials and labor that the state cannot produce. Naturally, officials will use whatever means required to make their deliveries, even if these means are forcible. This applies to financial assets as well. The wealthier the trading middle class grows, the more the state will subject them to loyalty payments and the like.

In North Korea’s current situation, what choice does Kim really have but to blame lower officials for failures, and admonish them to do better? The Pyongyang General Hospital is not the only grandiose, heavily publicized project that is doing poorly. The Wonsan-Kalma resort has also been plagued by shortages and delays. The government needs these projects not least for propaganda value, to show to the country that although difficulties abound, all is not hopeless, the economy is still making progress, and people’s living standards will improve. So when none of the projects carrying this message are working out, the government has a problem.

In normal times, the state could have dismantled more economic regulations to make it easier for people to conduct trade and private economic activity. Indeed, though it is difficult to quantify, the state giving room for market mechanisms has been the most important factor for the significant improvements in the North Korean economy over the past few years.

Right now, this is difficult to do, because the state needs to extract more resources, not fewer. Over the past few years, the state has grown increasingly short of foreign currency and other assets, first because of sanctions, and later because of the Covid-19 border shutdown (which has partially ended). As a result, we’ve seen the state cracking down more and more on private business and market actors, to bring in resources as other avenues dry up.

The more difficult things get for the North Korean economy, the more demands increase for “loyalty payments” from private citizens, to fund the mega-projects that Kim has staked so much credibility on. We can expect to see more officials lose their jobs in the future in the same manner as those who got axed after Kim’s hospital construction field guidance.

 

*Such self-criticism does of course happen, but its rarity is attested to by the fact that it (rightfully) makes news headlines. One recent example is Kim Jong Un’s 2017 New Year’s Address.

 

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Posted in General markets (FMR: Farmers Market), Health care, Political economy, Price liberalization, Private property, Uncategorized | Comments Closed

What explains North Korea’s puzzling price stability?

July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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Posted in Agriculture, Black markets, Economic reform, General markets (FMR: Farmers Market), International trade, Market prices, Political economy, Statistics | Comments Closed

North Korea promoting Mt Kumgang tourism

July 16th, 2020

By: Benjamin Katzeff Silberstein

Clearly, now is not the best time for tourism promotion. One might wonder what target audience is for the North Korean promotion website for tourism to Mt Kumgang. The website itself isn’t new, but as Yonhap/Korea Herald reports here, it’s recently been updated for the first time in a while. The update of a website perhaps isn’t the most riveting piece of news, but at the very least, it means that someone in some office in North Korea took time out of their day to keep this website maintained and updated with new pictures.

Even in non-Covid times, however, the success of Mt Kumgang under fully North Korean management is doubtful. Without cooperation with foreign partners, Mt Kumgang may meet the same fate as Masikryong, not exactly overcrowded with foreign visitors even before Covid hit. As I wrote in this column when North Korea confiscated Mt Kumgang, the success of the resort likely hinges upon South Korean and Japanese visitors coming in addition to tourists from China.

You can find the North Korean website in question here.

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Posted in China, South Korea, Tourism, Uncategorized, Wonsan-Mt. Kumgang International Tourist Zone | Comments Closed

North Korea gearing up for hard times

July 10th, 2020

By: Benjamin Katzeff Silberstein

An editorial in today’s Rodong Sinmun emphasizes that fighting the “global pandemic” is more important than economic construction. For Korean-speaking readers, the message comes near the end of the editorial on Friday July 10th, and reads:

그것은 인민들의 생명과 건강을 보호하고 증진시키는것을 최급선무로, 가장 영예로운 혁명사업으로 간주하고있기때문이다.그 어떤 경제건설성과보다 대류행전염병의 침습을 막는것을 더 중요하게 여기고 이 사업에 최선을 기울여야 한다는것이 우리 당의 요구이다.

(Source: 김병진, “인민의 생명안전을 굳건히 지키는것은 우리 당의 제일중대사,” Rodong Sinmun, July 10th, 2020.)

This is not a new message, and it’s been re-stated in various forms in North Korean state media over the past few months. As I write in this article at 38 North, the recent emphasis on the chemical industry carries the same message: don’t expect any major changes in the external economic environment anytime soon, whether it be in conditions relating to sanctions or Covid-19.

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Posted in Coronavirus, Health care, International trade, Political economy | Comments Closed

More anti-smuggling measures by the North Korean government

July 1st, 2020

By Benjamin Katzeff Silberstein 

The North Korean government is reportedly clamping down even further on smuggling across the Chinese border. As Daily NK notes, it’s a measure partially directed against corruption, which will most likely just increase bribery amounts. It’s also part of a broader state drive to assert its power over economic activity. Daily NK:

North Korean authorities recently ordered that ships travelling near the Sino-North Korean border must have a security official on board as part of efforts to crack down on smuggling, Daily NK has learned.

“The order concerns ships travelling along the Yalu River and states that they must have a Ministry of State Security [MSS] agent on board,” a source in China told Daily NK on June 25. “The order applies to all ships, regardless of whether they are container ships or fishing boats, and irrespective of their affiliation or purpose.”

Earlier this month, the MSS announced that anyone caught engaging in criminal activity near the border, including smuggling and attempting to defect, will be subject to strong punishments rather than rehabilitative measures, such as time at a forced labor camp.

The announcement of several measures pertaining to illegal activity near the border in the space of a month demonstrates how sensitive North Korean authorities are to smuggling and information leaks in the area.

BREAKING CORRUPTION

The order is also aimed at preventing corruption between local security officials and smugglers, according to the source.

Since it is common for smugglers to bribe local security officials, the MSS will reportedly send agents from the central government rather than local officers to work on the ships.

Smugglers say that the new order will only lead to more expensive bribes.

“You can earn up to RMB 10,000 [around USD 1,412] a day taking goods across the Yalu River,” the source said. “Because there’s so much money to be made, the measures won’t stop the smuggling. Smugglers will just have to pay higher bribes to the security officials.”

(Source: Jang Seul Gi, “N. Korea focuses on ending ship-based smuggling on border,” Daily NK, June 29, 2020.)

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Posted in China, Illicit activities, International trade, Political economy, Sanctions | Comments Closed

North Korea strengthens camera surveillance along the Chinese border

June 30th, 2020

Benjamin Katzeff Silberstein

This is part of a very interesting trend, of surveillance in North Korea going more high-tech. Border security under Kim Jong-un has been a high priority, resulting in a significant drop in the number of defectors reaching South Korea. Recall, as the article does, that this is but one of several purchase rounds of surveillance equipment from China in recent years. It’s also part of a government drive to strengthen control overall – of economic and social trends and activities:

“The equipment was purchased from China in mid-May and cost approximately RMB 20 million [around USD 2,825,497],” a source based in China told Daily NK on Wednesday.

“The camera system will be set up in areas where smuggling activities are common – not across the entire border,” he continued, adding, “The installation of the system will begin in late June.”

Given that the cameras will only cover a limited area on the border, the high price tag suggests two possibilities: 1) the new system will film in higher definition than existing camera systems; or, 2) the system is so advanced that it can detect even the slightest of movements.

There is the possibility that the installation of the new system is part of preparations to resume trade between China and North Korea, namely by further cracking down on smuggling activities by individuals.

“The purchase of the new system shows that North Korea wants to stamp out these smuggling activities to ensure only [official] Sino-North Korean trade is allowed across the border,” the source speculated.

The source noted that North Korean officials believe that smuggling activities conducted by individuals are a key way information and illicit goods enter and exit the country.

(Source: Mun Dong Hui, “N. Korea to install new surveillance cameras on Sino-NK border,” Daily NK, 26 June, 2020.)

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Posted in China, Communications, Political economy, Statistics, Surveillance | Comments Closed

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