North Korean businessman executed for refusing to buy bonds

May 12th, 2020

Benjamin Katzeff Silberstein

A very disturbing report from Daily NK. Much of North Korea’s economic governance does still rest on sheer management by brute force and extortion:

The owner of mine shafts in a suburban area of Pyongyang who refused to buy government bonds was recently arrested and quietly executed, Daily NK has learned.

“The owner, a Mr. Lee, was arrested at the Laborer Hall in the Kangdong Area Coal-mining Complex on May 6 and executed soon after,” a source in North Korea told Daily NK on May 7.

DANGEROUS WORDS

In late April, Lee was called to a meeting with other mine shaft owners by the complex’s sales department director. Lee’s open refusal to purchase government bonds at this meeting was reportedly the reason why he was punished so harshly.

North Korea began requiring organizations requiring state funds to purchase raw materials or supplies in the country to use bonds instead of cash from Apr. 20.

The source told Daily NK that the sales department director had called the meeting to echo calls by the government to “spend their dollars and participate in the national public bond purchasing plan.” While the other mine shaft owners quietly listened, Lee reportedly asked the director what would happen if he chose to “not buy any public bonds.”

The sales department director responded that the act would be considered “reactionary” because it would mean refusal to carry out party policy.

Lee responded sarcastically, asking in what way the “state” and the “complex” had helped him build up his mining business. His response led to a war of words between the two men.

“The sales department director immediately reported the events of that day to the complex’s party committee. The committee convened a ‘security committee meeting’ [안전위원회] that ended up reporting Lee to the Ministry of State Security [MSS],” the source said.

Security committee meetings are convened at the provincial, municipal and county levels to discuss and make decisions on urgent matters. Participants typically include the chairman of the relevant party committee, the chairman and vice-chairman of the local people’s committee and management-level security officials.

The MSS did not immediately take action against Lee. It was not until May 6 that agents from the security agency visited the complex, forced all the complex’s workers to gather in the facility’s Laborer Hall, and then arrested Lee in front of them for “verbal reactionism” (말 반동). Lee was charged with “criticizing party policy” and he was immediately executed without trial or any other due process.

SEVERE PUNISHMENT

It is rare in North Korea for such a punishment to be meted out so quickly – and on the same day – as an arrest. North Korean authorities may have aimed to make Lee an example of what happens when business people refuse to take part in party policy.

“[Other] mine shaft owners appear to be accepting the [government’s] plans to have enterprises buy up public bonds, but they are complaining about it nonetheless,” the source said.

The state reportedly seized Lee’s mine shafts along with large cargo trucks Lee purchased with his own money. North Korean authorities also raided Lee’s home and seized his possessions while his wife and two children were sent to a prison camp.

(Source: Ha Yoon Ah, “N. Korean businessman executed for refusing to buy gov’t bonds,” Daily NK, 12/5/2020.)

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“New” bridge between China and North Korea getting a little closer to completion. But what does it really mean?

May 12th, 2020

By: Benjamin Katzeff Silberstein

Another day, some more progress on the so-called “bridge to nowhere”. It’s now been around six years since construction started on the new bridge between North Korea and China, crossing the Yalu river. The currently operational one between Dandong and Sinuiju already (in normal times) operates over capacity, and frequently needs repairs. Last year, in June, Xi Jinping supposedly promised Kim Jong-un funding to finally complete the bridge and to connect it to North Korea’s road networks to make it operational. Recently, work has finally taken off again on the North Korean side to do just that. Dong-a Ilbo:

North Korea resumed the construction of a road on last Sunday, according to multiple sources and photos posted on a Chinese social media platform.

With the help of China’s investment, the six-lane bridge was completed in 2014 as a replacement of the Sino–North Korean Friendship Bridge, an old and narrow bridge built in 1943. The New Yalu River Bridge was expected to boost trade between the two nations.

(Source: Wan-Jun Yun, “New Yalu River Bridge gears up to open six years after its construction,” Dong-a Ilbo, May 4th, 2020.)

The Dong-a headline appears somewhat premature, however, since customs buildings and other essential infrastructure still isn’t built. As Daily NK reports:

The opening of the bridge has long been delayed because North Korea had demanded that China pay for the construction of the North Korean road to the bridge.

While Daily NK has been unable to confirm whether any agreement on the payment issue has been reached, the efforts to complete the road suggest that the two countries have reached some sort of agreement.

There may, however, be obstacles in the way of the bridge opening any time soon.

“Customs-related buildings need to be built even if the road is finished,” the source said.

“The closure of the Sino-North Korean border due to COVID-19 and international sanctions on North Korea make it difficult to know when the bridge will open,” he added.

North Korean authorities are also highly sensitive to the threat of the COVID-19 pandemic despite their moves to restart the road construction.

“Sinuiju residents were practically confined to their homes when COVID-19 posed a clear threat to the city, but the authorities have restarted construction – perhaps because the threat has gone away,” the source said.

“That doesn’t mean, however, that Chinese engineers and materials are entering the country [in quantities] like before,” he added.

A Chinese company had been managing the construction of the North Korean road to the bridge before work was halted. Now the North Koreans have completely taken over the construction process – none of the Chinese workers and their equipment are present at the construction site anymore, the source explained.

The lack of Chinese labor and equipment may be due to the North Korean government’s fears over COVID-19, but the country’s efforts to finish the road suggest that North Korean leaders are keen to use the bridge when Sino-North Korean trade begins again.

(Source: Mun Dong Hui, “N. Korean road connected to New Yalu River Bridge nears completion,” Daily NK, May 11th, 2020.)

There are two quite different ways of looking at these developments. I’d argue the bridge is, despite how things may seem, not a very good metric for the prospects of trade between China and North Korea. Surely, China would not likely invest in a new bridge unless it envisioned growing economic activity along the border. There are good reasons to believe that this is indeed the case, and that these border regions in particular regard North Korea as a driver for local growth and advantage. At the same time, planned economies such as China often make investment decisions for reasons unrelated to actual economic prospects. Perhaps infrastructure like this is also intended to boost the region itself, or at least, make it look like that is what the central government is doing. Moreover, it is also possible that China and North Korea merely envision replacing the current bridge over time. Last but not least, it may well be a political gesture of good faith and friendship to North Korea. Or, most likely, a mix of all of the above.

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What to make of the panic buying in Pyongyang and beyond

May 10th, 2020

By: Benjamin Katzeff Silberstein

There’s been a few reports over the past few weeks about panic buying in Pyongyang, particularly of imported goods. The foremost reason appears to be the government’s restrictions of imports, aside from essential goods (whatever these are). A quick thought:

On the one hand, on a closer reading beyond the term “panic buying”, it’s apparent that we aren’t really talking about fundamental, daily necessities for the most part, but about imported items such as batteries and certain vegetables. When we monitor economic developments for social stability, such analyses tend to focus on items like rice and, at least in countries other than North Korea, fuel, and not least the stability of the currency. So it may not matter all that much if people in a northern province cannot buy lighters imported from China, or if Pyongyangites can’t buy imported pepper and other non-staple goods. (As you will see in one of the articles below, Daily NK has not heard reports of panic buying in Hyesan at all.)

At the same time, however, these imported goods are quite essential in the everyday lives of many people. We don’t know how much of imported goods the average person consumes, and I suspect it’d differ greatly between provinces. Since at least a significant proportion of the population consumes imported goods on a regular basis, these difficulties in acquiring items imported from China would in many cases cause great annoyance and, in others, disrupt production processes of firms and industries, although some exceptions are granted for “essential” items. Who determines what’s essential is likely hinges on political and economic clout, and it certainly won’t be the mom-and-pop-shops of the backstreet markets.

I’ve gathered a few related articles here. AP wrote about the topic on May 7th, 2020, with intelligence sources in Seoul confirming the news:

The NIS said it cannot rule out a virus outbreak in North Korea because traffic along the China-North Korea border was active before the North closed crossings in January to try to stop the spread of the virus, according to the lawmaker.

The NIS declined to confirm Kim’s comments in line with its practice of not commenting on information it provides to lawmakers. Kim did not discuss how the NIS obtained its information.

Last Friday, Kim Jong Un ended his 20-day public absence when he appeared at a ceremony marking the completion of a fertilizer factory near Pyongyang. His time away triggered rumors about his health and worries about the future of his country.

The NIS repeated a South Korean government assessment that Kim remained in charge of state affairs even during his absence. His visit to the factory was aimed at showing his resolve to address public livelihood problems and inject people with confidence, Kim Byung Kee cited the NIS as saying.

The NIS said the virus pandemic is hurting North Korea’s economy, mainly because of the border closure with China, its biggest trading partner and aid provider. China accounts for about 90% of North Korea’s external trade flow.

The trade volume between North Korea and China in the first quarter of this year was $230 million, a 55% decline from the same period last year. In March, the bilateral trade volume suffered a 91% drop, the NIS was quoted as saying.

This led to the prices of imported foodstuffs such as sugar and seasonings skyrocketing, Kim Byung Kee quoted the spy agency as saying. He said the NIS also told lawmakers that residents in Pyongyang, the capital, recently rushed to department stores and other shops to stock up on daily necessities and waited in long lines.

The NIS said prices in North Korea “are being stabilized a little bit” after authorities clamped down on people cornering the market, Kim said in a televised briefing.

(Source: “Seoul reports panic buying in N. Korea amid economic woes,” AP/Mainichi, May 7, 2020.)

NK News was one of the first outlets to cover the topic, in an article on April 22nd:

“Panic buying” sprees have been spotted taking place in some of Pyongyang’s stores and groceries since Monday, multiple informed sources told NK News, resulting in increasingly empty shelves and a growing shortage of key staples.

It’s unclear what’s led to the sudden surge in demand, with one source describing empty shelves and a sudden absence of staples like vegetables, flour, and sugar.

Locals have been buying “whatever is there,” one expat said, saying that “you can hardly get in” to some stores.

Both the expat and another person in Pyongyang said the surge was particularly notable on Wednesday.

Another source said large groups of locals were seen buying big amounts of mostly-imported products in some grocery stores, resulting in abrupt shortages.

(Source: Chad O’Carroll, “North Koreans “panic buying” at Pyongyang shops, sources say,” NK News, April 22nd, 2020.)

Daily NK, of course, has reported extensively on the topic, from both Pyongyang and the provinces. Imported goods are not only consumed in Pyongyang:

“The prices of Chinese goods have risen sharply in markets across the province, including the Yonbong and Wuiyon markets in Hyesan,” a Ryanggang Province-based source told Daily NK on Apr. 28.

According to the source, the price surge has mainly affected Chinese products, including daily necessities such as sugar, flour, and other cooking products.

For example, the price of Chinese seasoning has increased fourfold to a KPW 40,000 (around USD 6). Flour, rice and other grain prices have also increased. Two weeks ago, imported Chinese rice was being sold at KPW 4,400 per kilogram but is now being sold at KPW 5,500.

The price hikes have not just affected food. Chinese cigarettes have also increased in price: a box of Chinese-made Chang Baishan cigarette packs, for example, which used to cost KPW 12,000, is now KPW 17,000.

“Even Chinese lighters, which usually cost around KPW 700, have seen a price hike of nearly threefold and now cost KPW 2,000,” the Hyesan-based source added.

The main reason for these price surges is the halt in Sino-North Korean trade following the closure of the North Korean-Chinese border in late January. The effects of the steep fall in Sino-North Korean trade were made clear in recent data published by China’s General Administration of Customs. According to this data, Chinese-North Korean trade in March dropped by 91.3% compared to the same period last year to just USD 18.64 million.

“Just two weeks ago merchants were feeling more optimistic given the improved situation in China. Now, they’ve lowered their expectations quite a bit,” the Hyesan-based source told Daily NK, adding, “Prices are rising because business people are intentionally sitting on their stocks with the hope that prices will increase even more.”

[…]

Meanwhile, Daily NK is unaware of any reports of panic buying in Hyesan [emphasis added].

(Source: Kang Mi Jin, “Ryanggang Province witnesses price spikes,” Daily NK, April 30th, 2020.)

And, more recently, a report from Pyongyang:

“There are a lot of ordinary stores that have closed or are unable to sell anything because they have no stock left,” a Pyongyang-based source told Daily NK on Apr. 30. “Right now 100 grams of imported pepper costs KPW 40,000, 450 to 500 grams of MSG costs KPW 48,000 and sugar can’t be found at all.”

PRICE SPIKES

The prices of imported food items nearly doubled after Apr. 17, when the North Korean government announced restrictions on imported goods deemed “unnecessary” for the North Korean economy. Prices began to rise rapidly once more before the publishing of this article in Korean on May 1.

According to Daily NK’s Pyongyang source, the price of imported pepper was just KPW 8,000 per 100 grams before the announcement, but doubled to KPW 16,000 after the decision was released. Now, the price has reportedly risen to KPW 40,000.

“The price of watch batteries and other small batteries for common household appliances like remote controllers for TVs have tripled or quadrupled,” the source further reported. “The price of batteries had remained stable even after the announcement, but several days ago it started to rise suddenly. The spike is probably because so many people began hoarding them.”

Although the price of batteries has risen to an unprecedented degree, Pyongyang residents reportedly continue to buy them in bulk, in boxes of 50, and as much as 10 boxes at a time. The hoarding is likely due to concerns that the price will only continue to rise and that soon there may not be any batteries left to buy.

“Many of the electronics stores throughout the city have closed down,” the source said, adding, “Stores that still have stock have closed perhaps because of rumors that Chinese products will no longer enter the country.”

In short, the source’s report suggests that state-run electronics stores, which command 20% of the market, have no stock left, while privately-run stores that take up the remaining 80% of the market have closed up despite still having stock on hand.

Based on the source’s report, owners of privately-run stores may have closed down their shops with the intent to sell their goods at prices even higher than they are now. The owners are likely under the belief that the recent import restrictions announcement means that various electronics accessories will no longer enter the country from China for some time.

(Source: Ha Yoon Ah, “Pyongyangites continue to hoard as prices keep rising,” Daily NK, May 4th, 2020.)

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Rural provinces provide food and construction materials to Pyongyang General Hospital construction

May 7th, 2020

By: Benjamin Katzeff Silberstein

To be fair, in theory, hospitals such as Pyongyang General Hospitals are supposed to provide care for rural residents with difficult medical problems too. That’s quite unlikely to happen, but still. It’ also essential to understand that this is how  the system is designed. North Korean media has publicized images of provincial localities “donating” construction materials for the hospital project. RFA:

North Korean residents are being forced to chip in with food aid for construction workers building a new hospital in Pyongyang, creating resentment among provincial residents who are not permitted to freely travel to the capital, sources in the country told RFA.

“Neighborhood watch units in each district of the province are holding meetings to discuss providing food to Pyongyang,” a resident of North Hamgyong province, who requested anonymity to speak freely, told RFA’s Korean Service.

“Regular events scheduled in March and April were all canceled [due to the coronavirus], but the neighborhood watch unit meetings go on as scheduled to solicit food aid for the construction workers in Pyongyang,” the source said.

Every neighborhood watch unit held such meetings on April 22, and the source attended one of them. “The meeting emphasized participation in the food aid campaign to complete the Pyongyang General Hospital as one of the nation’s top priorities,” the source said.

“As far as I know, these meetings to help out with Pyongyang’s food situation have been held in every neighborhood watch unit nationwide,” the source said.

According to the source, many of the provincial residents, who are themselves struggling to make ends meet due to COVID-19, resent that they are being asked to give to Pyongyang, a city where only the wealthy or well connected are granted permission to live.

“Some residents expressed their antipathy to the food aid request, asking why they must provide food for the Pyongyang General Hospital as it won’t even be usable by residents in the provinces,” the source said.

“In response, the neighborhood watch unit leaders argue that supporting the construction of the hospital is a top priority for the nation and has been ordered by the party amid a food situation that is bad all over the country,” said the source.

The watch leaders even went as far to say that the provincial people had it better than the privileged city-dwellers.

“They said that we have many ways to make money through our own businesses and side jobs, but Pyongyangers are tied to a very strict organizational lifestyle, so they have no means to get food or extra money,” the source said.

“In the end, the main point of the neighborhood watch meeting was that local residents should step up and feed Pyongyang because the situation in Pyongyang is difficult,” the source said.

Similar meetings were held in the North Hamgyong’s largest city Chongjin, according to another resident who also requested anonymity.

“[The meetings] are to force residents of the provinces, cities and counties all across the country to provide food aid for the construction workers at Pyongyang General Hospital,” the second source told RFA on April 28.

“The Supreme People’s Assembly is making each household give five kilograms (11 pounds) of rice or the equivalent in cash,” the second source said, adding, “The food situation is bad all over the place because of the coronavirus crisis, but I cannot understand how the people here in the provinces are supposed to feed Pyongyang.”

According to the second source, many of the residents were actually relieved when the coronavirus hit, because it meant they could get out of being mobilized for civic projects as happens every April.

“Just when we were relieved that there were no orders [to mobilize us] due to the coronavirus crisis, our moods soured when we were suddenly ordered to provide food for this construction site in Pyongyang.”

(Source and full article: Jieun Kim, Eugene Whong (transl.: Leejin Jun), “Rural North Koreans Forced to Provide Food Aid to Privileged Pyongyang,” Radio Free Asia, May 7th, 2020.)

For more on this, feel free to check out my recent 38 North article on health care in North Korea and the ongoing hospital construction.

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Why Kim Jong-un “came back” at a fertilizer factory

May 6th, 2020

By: Benjamin Katzeff Silberstein

The choice of a fertilizer factory inspection as the place for Kim Jong-un to “return” after his three-week absence was no coincidence. On May 2nd, Rodong Sinmun reported that Kim had toured and cut the tape at the Sunchon Fertilizer Factory. To do this in the month of May especially is highly symbolic, and we should understand it as a signal that Kim and the state are very serious about alleviating North Korea’s perpetually difficult food situation.

Sure, in the budget report at the Supreme People’s Assembly in the middle of last month, the claim was repeated of a bumper harvest last year. This claim is extremely unlikely to be true, as the numbers show, but should not be read literally in any case. Indeed, given North Korea’s economic situation, the food situation is remarkably stable, although always difficult. But still, these two claims aren’t necessarily inherently contradictory. Kim can claim a bumper harvest while also working to stabilize the food situation over the long run. Fertilizer has long been an achilles’ heel for North Korean agriculture, and historically the country has been highly dependent on chemical fertilizer. One of the main catalysts for the famine in the 1990s was the Soviet Union and China cutting of oil subsidies. North Korea’s ability to produce such fertilizers, whose production process is very energy-intensive, subsequently collapsed. The Rodong article announcing Kim’s “return”, unsurprisingly, highlights the completion of the fertilizer factory as a victory for North Korea’s independence and self-reliance.

This focus on fertilizers is not unique in North Korean media. Just the other day, on May 5th, an article in Rodong lauded the factory construction as a crucial step for North Korea to remain independent and reject “reform and opening”. Another the same day covered a new organic fertilizer factory in Sinyang County. Articles about fertilizer factories – particularly organic ones – have been highly prolific, especially since around 2016. That focus also isn’t new. The extensive use of chemical fertilizer damaged North Korea’s soil badly, and Kim Jong-il once gave an entire speech wholly focused on the supremacy of organic fertilizers.

Just like the focus on fertilizers, it’s no coincidence that it happens in May. This month marks the beginning of the main planting season in North Korea. The food security situation is already concerning, not least with the country’s coronavirus prevention measures keeping crucial shipments of agricultural inputs such as seeds reportedly backed up and waiting to enter the country. China has previously provided crucial fertilizer aid to North Korea (in addition to grain shipments), and perhaps still does so. But with China highly concerned about keeping re-infections out, as well as watching out for its own stability first and foremost, it may be more reluctant than it otherwise would to provide aid to North Korea to make up for a difficult harvest, should it be necessary.

Moreover, a significant question mark remains around North Korea’s fertilizer production efforts. Oil is still a central input for fertilizer manufacturing, as well as for irrigation efforts. How does North Korea intend to operate and power factories such as the one Kim visited in the long run? Regardless of what factories it builds, resources scarcity will continue to be a significant stumbling block for now.*

 

*(For some reading related to this issue, see the recent debate between Hazel Smith and James Kelly at PacNet.)

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April 27th, 2020: Worrying signs of distress in the North Korean economy

April 27th, 2020

By: Benjamin Katzeff Silberstein

Readers of this blog know that market prices have risen over the past few weeks, largely as a result of North Korea’s anti-COVID19-measures. Over the past few weeks, however, other signs than market prices have surfaced that the economic situation may be getting more difficult, unrelated to Kim Jong-un’s health situation.

  • On April 17th, the Cabinet and WPK Central Committee reportedly announced a ban of all non-essential imports. The reason, ostensibly, is anti-COVID19-protections. One can also imagine it has to do with keeping the country’s hard currency base in place.
  • This measure, and perhaps combined with the overall mood, led to panic buying of import products in Pyongyang shops.
  • Prices on imported goods have increased drastically, Daily NK reports, with the price of imported soybean oil going from 45 RMB to 100 RMB for 5kg.
  • We should also view the issue of the public bonds in this context. In mid-April, the state issued public bonds which it ordered the bureau in charge of constructing the Pyongyang General Hospital to use to pay suppliers. This may be a sign that the state lacks cash of its own to fund the project, and it may expand the bonds issuing program. Moreover, the state may require entrepreneurs to purchase them. If the state begins exerting pressure on economic actors to purchase these bonds, such policies could become measures to essentially confiscate the assets of private economic actors, because the state lacks funds of its own.

Lots of uncertainties as always, but these trends are well-worth keeping an eye on.

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North Korean economy updates, April 21st, 2020: schools opening, market prices down

April 21st, 2020

By: Benjamin Katzeff Silberstein

Here’s a brief compilation of some recent developments in the North Korean economy, mainly relating to the COVID19-situation, as most economic developments in the world are at the moment.

In recent reports, rice prices are down on markets, and quite significantly so. The average market price declined by around 19 percent between March 20th and 28th. Obviously, there is a reporting time lag here, but that can’t be avoided. Rimjingang’s latest reported figures (much earlier) are different but tend in the same direction.

Gasoline prices remained almost entirely stabile over the same period, climbing by 0.3 percent. The entirety of the price increase happened in Pyongyang, interestingly enough. As is generally the case, prices in Sinuiju are significantly lower than in the rest of the country, likely due to its proximity to China and North Korea’s main refinery near the border.

At the same time, we shouldn’t be too quick to assume this trend toward price stability will continue. There are currently no signs that border traffic will resume anytime soon, and this is very troubling not least because items such as fertilizers are in dire need for the approaching planting season (as noted by both NCNK and Rimjingang). While the latter reports that China is now refusing to start trade back up again in fear of COVID19 cases entering the country, Daily NK reports that Chinese trucks are crossing the bridge from Sinuiju, presumably after offloading goods in North Korea. North Korea is constructing a fertilizer factory in Suncheon, but reportedly struggling for construction parts and equipment.

This week, North Korea re-opened some schools and universities, after the extended winter break implemented as a measure against the spread of COVID19. Here is a rather chipper and, in its own way, very interesting clip from what is presumably a twitter account run by the North Korean government.

Finally, in some non-COVID-news, the re-forestation campaign apparently continues in the country. Rodong Sinmun ran an article on Tuesday April 21st about sapling research at Kanggye University. (Here is a link though I’m not sure it works.) And Rodong claims that coal production in one of the country’s mines is increasing due to better inefficiency. We have no way of telling whether this is true, but North Korean media touting coal production given the way things currently stand is interesting. Perhaps a tacit way of acknowledging, and touting, what the latest UN Panel of Experts report claimed about the significant amounts of coal exported by North Korea despite the sanctions in place to prevent it from doing so.

 

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North Korea’s 2020 parliamentary session and the budget: the main points

April 14th, 2020

By: Benjamin Katzeff Silberstein

This past Sunday, the 12th of April, the North Korean Supreme People’s Assembly met at Mansudae Assembly Hall, the grand, majestic room where the assembly sits. Out of the six items on the SPA’s agenda, at least three – half – dealt in some shape or form with the economy, and arguably, some others could also fit into that category:

The agenda items of the Third Session of the 14th SPA of the DPRK were decided at the session:

1. On adoption of the law of the DPRK on recycling resources

2. On adoption of the law of the DPRK on tele-education

3. On adoption of the law of the DPRK on providing living conditions for discharged officers

4. On the work of the Cabinet of the DPRK for Juche 108 (2019) and its tasks of Juche 109 (2020)

5. On implementation of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020).

6. Organizational matter.

(Source: “Third Session of 14th SPA of DPRK Held,” Korean Central News Agency, April 13, 2020.)

I include the Cabinet report given the strong emphasis over the past years of the cabinet’s leading role in economic management. A separate KCNA-report from the same day, “Report on Work of DPRK Cabinet for Juche 108 (2019) and Its Tasks for Juche 109 (2020),” summarized this report of the cabinet’s work. I paste it here with some annotating comments. Yes, the whole first paragraph below is one sentence:

According to the report on the work of the Cabinet delivered at the Third Session of the 14th Supreme People’s Assembly(SPA) of the Democratic People’s Republic of Korea (DPRK), last year the Cabinet organized a drive of putting the overall national economy on a new higher stage with a main emphasis put on accomplishing the sustained economic development, ensuring the local production of equipment, raw and other materials and revitalizing production by boosting the capability of independent development of the country, true to the important tasks set forth by Supreme Leader Kim Jong Un in his report at the Fourth Plenary Meeting of the Seventh Central Committee of the Workers’ Party of Korea and in his historic policy speech at the First Session of the 14th SPA.

None of these phrases (“local production of equipment” etc) are new or surprising, and the most notable fact is perhaps the absence of anything unusual in such an unusual time (coronavirus, sanctions).

The report said that last year all sectors and units of the national economy carried out the gross yearly industrial production value at 108 percent, and ministries, national institutions, the city and county people’s committees and industrial establishments over-fulfilled their national economic plan.

The electrical power industrial sector carried out the hydraulic power generation plan at 103 percent and made sure that production was increased by properly carrying on the repair and readjustment of generating equipment.

Now this is interesting – repairing and readjusting could either mean a claim that the industry is doing fine even without imports of Chinese machine parts and the like, because it can simply repair and readjust what’s already there. Or, it’s a claim that in fact, despite sanctions, the country’s industries are able to replenish whatever equipment it needs to stay afloat.

The thermal power plants provided a guarantee for stabilizing the electric power production without relying on heavy oil.

The coal industrial field respectively showed 23 percent and 22 percent increases in the coal production and the supply of coal for thermal power generation over last year, and the large-scale coal mines rich in deposits and with favorable mining conditions provided a foundation to increase coal production.

In the field of the metallurgical industry the Kim Chaek Iron and Steel Complex has shown 22 percent, 2 percent and 37 percent increases in the production of pig iron, steel and rolled steel over last year. The chemical industry achieved large growth in the production of chemical fertilizer, carbide and caustic soda.

Of course, any claims of over-fulfillment of quotas and the like should be taken with a grain of salt, as such claims are classical in North Korean propaganda regardless of their foundation in reality (the genre was born in the Soviet Union). Still, trying out a charitable reading, there are theoretical ways in which claims over over-fulfillment could technically be true, particularly in these sectors. We know nothing about the revenue of these products, for example, and mines and factories could churn out production in great magnitudes but with questionable value when the products can’t be exported or sold at a profit at all. Because coal prices have dropped so much under sanctions, industry could well be powered at a lower cost, but the value of this is, again, questionable.

[…]

On the agricultural front the peak-year level was exceeded in the grain production even under unfavorable weather conditions.

A repetition of the claim of a bumper harvest last year, which remains highly unlikely, as I argued here.

A fishing campaign for supplying more fish to the people was launched in the fishery sector, and the fishing was put on a higher scientific level with the help of the updated aid system for detecting fishing ground.

Again, the sector may certainly produce and supply more, but its incomes will still be lower than they would be without sanctions.

The field of the land and environment protection turned the important projects including the Wonsan Kalma coastal tourist area and the Yangdok Hot Spring Resort into thick woodland and greenery and face-lifted all roads including Pyongyang-Hyangsan and Pyongyang-Wonsan Motorways.

A hint that investment continued in the tourism industry, and that the state expects this industry to blossom in the future, despite the currently dire situation. By extension, perhaps also a suggestion of expected solid economic ties and exchange with China.

The report contains a great deal of interesting detail, but in the interest of time, I’ll skip ahead to the most central parts (my own emphasis):

The report emphasized that all the achievements made last year clearly proved once again that as long as there is the wise guidance provided by the Party, we can live on our own and open up the road of our own development and prosperity no matter how desperately the enemies may try.

The report also said that serious mistakes were found in the work of the Cabinet last year.

They taught a serious lesson that if the officials in charge of providing economic guidance fail to fulfill their duty, it would be impossible to successfully attain the goals of economic construction set forth by the Party, the report said.

It clarified that we face heavy yet responsible tasks to unconditionally and thoroughly carry out the economic construction tasks set forth at the 5th Plenary Meeting of the 7th Central Committee of the WPK under the uplifted slogan “Let’s Break through Head-on All Barriers to Our Advance!”

It went on:

The Cabinet will put a main emphasis on organizing the economic work on the principle of subordinating everything to the health and safety of the people, conducting courageous head-on breakthrough in the spirit of achieving prosperity by dint of self-reliance, and fully meeting the needs for the national economy and for the people’s living by readjusting the economic foundation of the country and by fully tapping the production potential, in order to thoroughly carry out the tasks set forth in the joint resolution of the WPK Central Committee, State Affairs Commission and the Cabinet.

The Cabinet will rationally readjust the economic work system and order and boost its role as the organizer of the state economy.

It will put efforts into holding full control of the resources and fund sources of the state, and securing financial ability and execution power capable of managing and operating the country’s economy in a unified manner.

There are some key phrases below as well, but these two paragraphs are especially noteworthy. The message seems fairly clear that the state’s role in the economy needs to get stronger, and that while independent management methods may certainly be encouraged, the state is in charge. This message is familiar from Kim Jong-un’s December CC Plenum speech.

It will establish a strict discipline for the state development and use of the underground natural resources that are of strategic significance in the state economic development, and also take strong measures to protect and multiply aquatic resources.

It will bring about innovation in the work system, order and method on the principle of ensuring smooth transaction in the overall trade, and thoroughly guarantee the economic benefits of the country through the application of strict discipline and order in the import and export.

Perhaps both a reference to easing some rules and regulations for trade, while also combatting the rampant trade deficit?

[…]

The coal industrial sector will fully meet the demand for coal from several fields of the national economy including electricity, metal and chemical industries.

Note the absence here of any reference to coal exports.

[..]

The light industrial field will expand the variety of daily necessities and boost their quality. It, regarding the local production of raw and other materials as the lifeline, will rely on the locally available raw and other materials as much as possible for the production of consumer goods, put efforts into the development of local industry and contribute to the improvement of people’s standard of living.

Making consumer goods production and supply more local, and less reliant on imports, has been one of the chief goals through Kim Jong-un’s tenure. Judging by, for example, this recent report about consumer choice in kitchen items, it seems to be going quite well.

The Cabinet, corresponding to its position and duty as the economic command, will ensure the definite provision of unified operation and command for implementing the economic policies of the Party, and guarantee the meticulous economic organization and persevering practices and thus fulfill its responsibility and duty in glorifying this year marking the 75th founding anniversary of the Party as a year of victory to be specially recorded in the history of the country, the report stressed.

The report ends with one final emphasis on the Cabinet, and thus, the state, and not grassroots, independent actors, as the main holders of power in the economic realm. “The economic command” is about as clear of an expression as you could imagine. This doesn’t necessarily mean that the state will try to curb the market system anytime soon, but it will continue to subvert market forces into its own institutions where they can be more easily controlled and generate cash to the state.

The above is just a brief overview and quick read of the budget report. For more on the proportions and overall economic conditions that the report speaks of, check out Ruediger Frank’s recent 38 North article on the SPA session as a whole.

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Posted in Cabinet, Coal, Dams/hydro, Energy, International trade, Light Industry, Manufacturing, Political economy, State Offices, Supreme Peoples Assembly | Comments Closed

Politburo meets, but SPA postponed (till following Sunday)

April 12th, 2020

Benjamin Katzeff Silberstein

The SPA was expected to meet this past Friday. It didn’t. (Update 13/4/: it instead met on the following Sunday.) Instead, the politburo held a meeting to discuss measures the SPA would be adopting. There were scant but clear references to economic affairs (highlighted below), though the KCNA report is very vague. NK News suggests the SPA may instead convene Monday.

It adopted the joint resolution of the Central Committee of the WPK, the State Affairs Commission of the DPRK and the Cabinet of the DPRK “On more thoroughly taking national measures for protecting the life and safety of our people from the worldwide epidemic disease”.

The joint resolution detailed the goals of continuously intensifying the nationwide emergency anti-epidemic services and pushing ahead with the economic construction, increasing national defence capability and stabilizing the people’s livelihood this year, and indicated the tasks facing every field and every unit including Party and government organs and working people’s organizations and armed forces organs and ways of carrying them out.

It studied and approved “On the execution of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020)”, the second agenda which is to be presented to the Third Session of the 14th Supreme People’s Assembly.

(Source: Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un, Korean Central News Agency,” 12/4/2020.)

Update 13/4/2020: the SPA was held on Sunday instead. KCNA:

The third Session of the 14th Supreme People’s Assembly (SPA) of the Democratic People’s Republic of Korea (DPRK) was held at the Mansudae Assembly Hall on Sunday.

The SPA deputies attended the session.

Seen on the platform were Choe Ryong Hae, member of the Presidium of the Political Bureau of the Central Committee of the Workers’ Party of Korea (WPK), first vice-chairman of the State Affairs Commission (SAC) of the DPRK and president of the Presidium of the SPA, and Pak Pong Ju, member of the Presidium of the Political Bureau of the WPK Central Committee, vice-chairman of the SAC of the DPRK and vice-chairman of the WPK Central Committee.

Also seen there was Kim Jae Ryong, member of the Political Bureau of the WPK Central Committee, member of the SAC of the DPRK and premier of the Cabinet.

The platform was also taken by Ri Il Hwan, Choe Hwi, Ri Pyong Chol, Kim Tok Hun, Kim Yong Chol and members of the SAC of the DPRK and the Presidium of the SPA.

The chairman and vice-chairpersons of the SPA took their seats.

The opening address was made by Chairman Pak Thae Song.

The agenda items of the Third Session of the 14th SPA of the DPRK were decided at the session:

1. On adoption of the law of the DPRK on recycling resources

2. On adoption of the law of the DPRK on tele-education

3. On adoption of the law of the DPRK on providing living conditions for discharged officers

4. On the work of the Cabinet of the DPRK for Juche 108 (2019) and its tasks of Juche 109 (2020)

5. On implementation of the state budget for Juche 108 (2019) and the state budget for Juche 109 (2020).

6. Organizational matter.

The first, second and third agenda items were discussed at the session.

Deputy Thae Hyong Chol, vice-president of the Presidium of the SPA, made a report on the three agenda items.

He referred to the importance and significance of the laws to be discussed and adopted at the session, and explained the chapters of the laws.

He laid the adoption of the three laws before the SPA.

Ordinance of the SPA of the DPRK “On adoption of the law of the DPRK on recycling resources “, “On adoption of the law of the DPRK on tele-education” and “On adoption of the law of the DPRK on providing living conditions for discharged officers” were adopted with unanimous approbation at the session.

There was a discussion on the basis of an in-depth study of the reports on the fourth and the fifth agenda items.

The speakers said that the work of the Cabinet and the execution of the state budget for last year were correctly summed up, and that the tasks of the Cabinet for this year were clearly set and the state budget was properly worked out in the direction of implementing the decisions adopted at the 5th Plenary Meeting of the 7th Central Committee of the WPK and the joint resolution adopted at the Meeting of the Political Bureau of the WPK Central Committee. They voiced full support and approval.

In their speeches they analyzed and reviewed the successes, experience, mistakes and lessons in the work of their fields and units last year and referred to the methods of opening a broad avenue to the socialist construction and propping up the self-supporting economic power.

There adopted decision of the SPA of the DPRK “Report on the work of the Cabinet of the DPRK and on approving the implementation of the state budget for Juche 108 (2019)” and ordinance of the SPA of the DPRK “On state budget of the DPRK for Juche 109 (2020)”.

The session discussed the sixth agenda item.

At the request of Deputy Choe Ryong Hae, first vice-chairman of the SAC and president of the Presidium of the SPA upon authorization of the Chairman of the State Affairs Commission of the DPRK, Deputy Choe Pu Il and Deputy No Kwang Chol were recalled from the membership of the SAC.

Also recalled were Ri Su Yong, Thae Jong Su and Ri Yong Ho.

Deputies Ri Pyong Chol, Kim Hyong Jun, Kim Jong Gwan, Ri Son Gwon and Kim Jong Ho were by-elected as members of the SAC.

Upon authorization of the Political Bureau of the WPK Central Committee, Deputy Ko Kil Son was by-elected as the secretary general of the Presidium of the SPA and Deputy Kim Yong Hwan as a member of the Presidium of the SPA.

Members of the Cabinet were newly appointed.

Upon authorization of the WPK Central Committee, Deputy Yang Sung Ho was appointed as vice-premier, Deputy Kim Chol Su as minister of Natural Resources Development, Kim Jong Nam as minister of Machine-building Industry, and Ri Song Hak as minister of Light Industry.

Chairmen of the Subcommittees of the SPA were recalled and by-elected.

Deputy Kim Jong Ho was by-elected as chairman of the Legislation Committee of the SPA, Deputy Kim Tok Hun as chairman of the Budget Committee and Deputy Kim Hyong Jun as chairman of the Foreign Affairs Committee.

Chairman Pak Thae Song made a closing address.

(Source: “Third Session of 14th SPA of DPRK Held,” Korean Central News Agency, 13/4/2020.)

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North Korea needs to counter the economic impacts of COVID19, but what can it really do?

April 10th, 2020

By: Benjamin Katzeff Silberstein

Many countries are adopting stimulus measures to counter the economic impacts of the drastic economic slowdown resulting from measures to counter the COVID19 outbreak. North Korea, too, badly needs to counter the likely devastating impacts of its border shutdown to China, but it has no funds to adopt measures even nearly comparable to ordinary stimulus measures. As Yonhap speculates here, the Supreme People’s Assembly today (Friday April 10th) are scheduled to meet and may announce policies to counter the economic impacts, but it’s unclear what they can really do:

North Korea’s rubber-stamp legislature was to hold a once-or-twice-a-year session on Friday, with economic and public health issues expected to take center stage amid its ongoing fight against the novel coronavirus.

The Supreme People’s Assembly (SPA) usually meets in April every year to address the state budget and Cabinet reshuffling, but it has been closely watched from outside for any glimpse into the reclusive state’s stance on foreign affairs, including its stance on denuclearization talks with the United States.

Friday’s meeting, however, is expected to center on discussions of major domestic issues, given that Pyongyang has been making all-out efforts to block the outbreak of COVID-19 on its soil.

North Korea is among just a few countries in the world that claim to have no coronavirus infections, generating speculation that it might be hushing up an outbreak.

Pyongyang has tightened control of its borders with China, where the coronavirus originated in late December. It has also toughened quarantine criteria and restricted the movement of people and goods.

In particular, the border closure with China could weigh on its already moribund economy long crippled by global sanctions, as it depends heavily on the neighboring ally for its trade.

It is unclear whether leader Kim Jong-un will attend the SPA meeting. Observers say that he is unlikely to be present as he was not among deputies elected in March last year to the parliament.

Kim attended last year’s meeting to give a policy speech at the session.

Earlier in the day, state media reported that Kim has supervised a mortar firing drill. It did not provide details on when and where the drill took place, but such military activity is usually reported a day after it happened.

But there have been no state media reports on a politburo and a plenary meeting of the ruling Workers’ Party, which used to be held with Kim in attendance ahead of an SPA session.

Experts say that the North could announce an increase in its budget to improve public health infrastructure and unveil measures aimed at cushioning the impact of its anti-virus campaign on its economy during the SPA meeting.

(Source: “N. Korea set to hold parliamentary meeting amid nationwide virus fight,” Yonhap News, April 10th, 2020.)

The North Korean government doesn’t entirely lack resources, but it doesn’t have the sort of budgetary flexibility that a government needs to launch serious stimulus programs. It could theoretically ease up on restrictions on economic activity, such as decrease fees for market traders (markets are themselves problematic given the risk of the virus spreading there), ease up on permit regimes for various sorts of economic activity, lower mandatory fees and taxes, and the like. This is unlikely to happen, since the state itself already faces serious economic woes, and local-level government institutions likely will not be content with having a crucial source of income curtailed. More to follow after the SPA meeting results are announced.

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

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