{"id":4520,"date":"2020-04-09T12:39:35","date_gmt":"2020-04-09T03:39:35","guid":{"rendered":"http:\/\/www.01.asiapress.org\/rimjin-gang\/?p=4520"},"modified":"2022-05-16T18:01:10","modified_gmt":"2022-05-16T09:01:10","slug":"forpro1","status":"publish","type":"post","link":"https:\/\/www.02.asiapress.org\/rimjin-gang\/2020\/04\/recommendations\/forpro1\/","title":{"rendered":"\uff1cN. Korea Pro Report (Part 1)\uff1e How is North Korea\u2019s Economy Faring in the Face of the Coronavirus Pandemic and Continued Sanctions?"},"content":{"rendered":"
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The market of Chongjin, the country\u2019s third largest city. With the food distribution system all but collapsed, the majority of people survive through their private market activity. Photograph taken in Chongjin in September 2013 by ASIAPRESS.<\/p><\/div>\n

Due to the chaos caused by the global spread of COVID-19, the issue of North Korea\u2019s denuclearization seems to have fallen by the wayside. In North Korea too, the pandemic and its side effects have resulted in much turmoil. After a third year of strict economic sanctions imposed by the UN Security Council and a tumultuous few months due to coronavirus prevention measures, what is the current state of North Korea\u2019s domestic economy?<\/p>\n

On February 29, North Korea\u2019s Chosun Central News Agency published Kim Jong-un\u2019s statement that \u201cif the infectious disease enters our country, it will have serious consequences.\u201d The regime has responded with a strong sense of crisis, ruling as though under martial law. To get a sense of the regime\u2019s response and, at the same time, understand the impact of the economic sanctions on the domestic economy, it is best to return to the beginning of the crisis, just after the outbreak of COVID-19 began in China.<\/p>\n

1) The Impact of COVID-19<\/strong><\/p>\n

\u25c6 The Kim Jong-un regime quickly blocks the border<\/h2>\n

With knowledge of the outbreak of coronavirus in Wuhan, China, North Korean authorities notified travel agencies of the suspension of tours on January 22, just before the Lunar New Year holiday. To block the coronavirus from entering the country, the regime decided to sacrifice its income from tourism, an industry not subject to economic sanctions.<\/p>\n

In addition, trade was halted in late January, when the regime decided to block the Chinese border altogether, blocking exit and entry of goods and people entirely. Dating back to the beginning of January, the authorities were thorough in quarantining trade officials who had visited China as well as quarantining people in the country with Chinese contacts.<\/p>\n

The North Korean authorities themselves must be aware of the limitations of its quarantine system. With a major lack of drugs, disinfectants, and testing equipment, the country\u2019s quarantine measures would not be strong enough to stemie a rapidly spreading epidemic.<\/p>\n

As of April 1, North Korean authorities have continued to repeat claims of \u201czero infections.\u201d The authenticity of these claims, however, is unknown. ASIAPRESS contacts its reporting partners living in North Korea daily but they have neither been able to confirm nor refute the claims. ASIAPRESS partners did, however, report of rumors of infections in Pyongyang, Sinuiju, Rason, and Chongjin, saying that \u201cthe situation is serious.\u201d
\nNext page :With no Chinese products coming in, inflation ensues...<\/strong><\/p>\n

\u25c6 With no Chinese products coming in, inflation ensues<\/h2>\n

North Korean citizens are more concerned by the economic threat of the crisis than the threat of contracting the disease. With imports stopped at the Chinese border, their lives have been immediately impacted. As Chinese goods are in short supply, prices have soared. The price of gasoline has risen by 30% and the price of cooking oil has doubled and tripled in some places. Even the price of domestically-produced rice has skyrocketed. (Information based on North Korea's latest prices)<\/p>\n

A reporting partner in the northern province of Ryanggang said, \u201cThe number of traders at the market has fallen by about 30% compared to the normal level. There is nothing to sell because industrially produced goods such as shoes, clothing, and utensils are not coming across the border. Inventory prices are skyrocketing and the market is quiet, with few customers coming to buy anything other than groceries.\u201d<\/p>\n

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Latest Market Price Index Inside N.Korea<\/p><\/div>\n

Cities further away from the Chinese border are said to be in an even graver situation, with the prices of Chinese-produced goods climbing even higher. Concerned by the market turmoil, authorities have taken tough price intervention measures.<\/p>\n

According to another reporting partner living in the northern region of the country, \u201cThe authorities set a ceiling on the price of white rice at 4.5 RMB per kilogram in early February. On February 7, the authorities lowered this ceiling further, down to 3.6 yuan per kilogram. One merchant, who was caught selling rice for higher than 3.6 yuan per kilogram was forced to surrender 4 tons of rice to the authorities. Merchants are complaining bitterly about being ordered to lower their prices by the authorities, as the rice they are selling has not been received from the state.\u201d (1 RMB is worth 172 South Korean won)<\/p>\n

The market has been hit hard in the short term because daily consumer goods as well as vehicles and fuel are mainly imported from China. Recently, North Korea\u2019s state media has been making frequent appeals for boosted output of domestically-produced goods. According to those who have visited Pyongyang, there are many shops and department stores that are full of excellent domestic products. Most of these products, however, were made by bringing in production equipment, raw materials, and packaging materials from China.<\/p>\n

The pandemic is likely to have a huge impact on the North Korean economy and the Kim Jong-un regime in the future. Weaknesses of the North Korean-style totalitarian style of rule may certainly be exposed. This will be elaborated on later in this series of articles. It would be best, first of all, to discuss the impact of the UN Security Council\u2019s economic sanctions- sanctions labeled as the strongest in history.
\nNext page :Regime had been frantically making up for losses suffered due to the economic sanctions...<\/strong><\/p>\n

2) Regime had been frantically making up for losses suffered due to the economic sanctions<\/strong><\/p>\n

According to an announcement by Chinese customs authorities, North Korea\u2019s exports to China in 2019 remained steady compared to the previous year. Imports rose 16.1% during the same period, while total trade increased 14.8% over the same period. As a reference, North Korea is known to rely on China for about 92% of its trade.<\/p>\n

UNSC sanctions were tightened in the second half of 2017, and exports to China began to decline from the end of that year. Though North Korea\u2019s trade volume increased significantly from 2018 to 2019, exports to China in 2018 showed a 90% decrease from the year previous. As such, North Korea\u2019s trade is still struggling immensely in comparison to 2016, before the sanctions were tightened.<\/p>\n

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\u203bTable 1<\/p><\/div>\n

To make up for sluggish trade under the sanctions, the Kim Jong-un regime attempts to earn foreign currency in various ways. This can be roughly divided into 5 categories:<\/p>\n

1. Theft or money laundering through hacking
\n2. Conversion of production to non-sanctioned items
\n3. Forced foreign currency from the domestic population
\n4. State-run smuggling
\n5. Workers dispatched overseas<\/p>\n

According to a report submitted to the UN Security Council's North Korea Sanctions Committee in July 2019, North Korea has been hacking into foreign financial institutions and virtual currency exchanges for years, stealing up to $2 billion and successfully laundering money.<\/p>\n

The country\u2019s exports to China in 2016 valued a total of $2.6 billion so, if the information contained in the report is true, it must mean that a huge proportion of the state\u2019s funds have been obtained through illegal means.
\nNext page :The search for non-sanctioned goods...<\/strong><\/p>\n

\u25c6 The search for non-sanctioned goods<\/h2>\n

North Korea has focused on switching to manufacturing products that are not subject to the sanctions. We can see this by comparing the country\u2019s top 5 exports to China from 2016 and 2019.<\/p>\n

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\u203bTable 2<\/p><\/div>\n

Topping the list in 2019 is \u201cwatches and watch parts.\u201d These products are produced through a consignment deal, where a Chinese company provides the raw materials. The second largest export in 2016, meanwhile, was consigned textile products. As textile products were made subject to sanctions, the regime had to find new products, such as watches, to manufacture.<\/p>\n

The second largest export is \u201cdown and feather products.\u201d These products will have also been produced on consignment. As reporting partners in North Korea have long reported, \u201cwigs and artificial eyelashes are being produced everywhere. They are even having inmates in prisons make wigs.\u201d<\/p>\n

Third place belongs to \u201csteel\u201d and fourth place belongs to \u201ccopper ore, slag ore, and lime.\u201d Since iron and iron ore are subject to sanctions, steel, ferrosilicon, tungsten, and other non-sanctioned minerals are being exported. The fifth strongest export is \u201coptical, photographic, and measuring equipment and accessories.\u201d These are also likely to be consigned products produced in cooperation with a Chinese manufacturer.<\/p>\n

According to reporting partners, the main item that trading companies buy from local residents for export to China are herbs for traditional medicine. Last year, companies were said to be buying praying mantis eggs, although the eggs were not officially listed as exports. The eggs may have, in fact, been traded through \u2018state-run smuggling\u2019- a practice that will be described later.<\/p>\n

Needless to say, such efforts to switch to non-sanctioned products for manufacturing have been dashed, with the border completely sealed to prevent the spread of the coronavirus. (ISHIMARU Jiro)<\/p>\n

\u203bASIAPRESS contacts reporting partners in North Korea through smuggled Chinese mobile phones.<\/p>\n

Part 2 >>><\/strong> \uff1cN. Korea Pro Report (Part 2)\uff1e How is North Korea\u2019s Economy Faring in the Face of the Coronavirus Pandemic and Continued Sanctions? A Look at the Regime\u2019s Revenue Schemes<\/a><\/strong><\/span><\/p>\n

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