Country Report North Korea February 2011

The domestic economy: The underlying state of the economy is dire

The government's focus on improving light-industrial output was reflected in Kim Jong-il's first "guidance" visit of 2011, to the newly built Nampo Glass Bottle Factory (Nampo is the port for Pyongyang). KCNA reported that the plant began production on January 24th, and was capable of producing tens of millions of bottles a year. However significant this industrial development, the underlying state of the North Korean economy looks dire. The cold winter has exacerbated shortages of food and fuel. Power cuts are also problematic. On January 20th Open Radio for North Korea (ORNK), one of several Seoul-based non-governmental organisations (NGOs) with seemingly good contacts inside the North via defectors and other sources, reported that part of Ryanggang province in the far north had been without electricity all month. Even in Pyongyang, where brown-outs had grown rarer last year, most people reportedly only have electricity for a couple of hours per day.

Inflation remains a severe burden. ORNK has also reported that recently "students and parents have been burdened with supplying firewood for school heating, while the prices of coal and wood are skyrocketing in the markets". The IFES has noted that staples such as rice, maize and pork are also rising in price. It cited a claim by a Japanese NGO, Rescue the North Korean People! Urgent Action Network (RENK), that the price of rice in Pyongyang soared from Won1,400 (around US$10 at the official exchange rate, or 40 US cents at the unofficial market exchange rate) per kilogram on January 7th to Won1,900/kg just three or four days later. Maize rose from Won750/kg to Won950/kg, and pork from just under Won4,000/kg to around Won5,000/kg in the same time-frame. Prices cited by other sources vary slightly from RENK's, but the underlying story of rapid price increases remains the same. A South Korean Buddhist NGO, Good Friends, has suggested that grain prices may have risen in the North this year because party officials in charge of grain imports are behind schedule, while the rising value of both the US dollar and the Chinese renminbi has driven up the cost of overseas food purchases.

On January 5th Good Friends published what it claimed were the views of local officials in various different regions of North Korea. Those in Hamhung city on the east coast, the site of the main vinalon factory, reported that output of juche steel and textiles was lower than expected. In Sariwon, which is located south of Pyongyang, a major provisions store for the military was emptied when its entire contents were sent to the KPA after the WPK conference in September 2010. To restock it, officials were sent to farms to get more grain. After a poor harvest caused by flooding, this meant appropriating farmers' personal stocks.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
IMPRINT