GoodFriends: Research Institute For North Korean Society

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North Korea Today No. 339 April 2010

[“Good Friends” aims to help the North Korean people from a humanistic point of view and publishes “North Korea Today” describing the way the North Korean people live as accurately as possible. We at Good Friends also hope to be a bridge between the North Korean people and the world.]
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Announcement: Good Friends will not be releasing its weekly publication, North Korea Today, for one month in April to take the much needed time for reorganization. We will resume the publication after the break with new improvements. We appreciate your interests and support for NKT. Good Friends will continue to do the best it can to help North Korean people’s voice be heard as accurately as possible and to serve as a foundation for peaceful reunification of Korea.Thank you. Good Friends USA
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[Hot Topics]
Rice Price Drops Temporarily Due to Regulations by 100:1 Enforcement Agents
Drop of Foreign Currency is Linked to Falling Rice Price
Large Factories Provide Rations by Selling Pig Iron, Influencing Drop in Rice Price

[Food]
People Die of Starvation Everyday in Sinuiju

[Economy]
Experts inside North Korea said “The wrong policy causes a couple of million dollar loss every day”.

[Politics]
Central Party Security Groups Dispatched to National Border Area to Confiscate Mobile Phones

[Society]
Conscription this Year, “Girls Taller than 155cm to be Drafted without Exception”
Fishermen Lament Being Regarded as Means of Earning Money, rather than Husbands

[Women/Children/Education]
North Hamgyong Province, Junior High School Moves to Hoeryong from Chungjin

[Accidents]
Security Agent Murdered While Trying to Confiscate a Cell Phone in Hoeryong City

[Investigative Report]
What is meant by “Every Price Must Be Converted at the Rate of 100:1?”
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[Hot Topics]
Rice Price Drops Temporarily Due to Regulations by 100:1 Enforcement Agents

On March 30th, the price of rice plummeted from 700 NKW/kg to 140 NKW/kg in Dangsang Market of Mangyundae area, Pyongyang City. It is not the only commodity affected. For example, the price of corn dropped from 400-500 NKW per kilogram to 40 NKW, or roughly 1/10 of the previous price. The prices are going down in other regions as well. On the same day, rice was 200 NKW per kilogram and corn was 68 NKW per kilogram in Haeju City of South Hwanghae Province. In Hoeryong City of North Hamgyong Province, rice was 250 NKW and corn was 80 NKW. The wholesale sellers of food believe that the price of rice dropped from 700-800 NKW per kilogram to 200 NKW on average nationwide because of the regulations by 100:1 standing committee, not because of an increase in rice supply. From March 16th to 18th, one member of the cabinet was dispatched in each county to exercise an intense control of the market.

On March 29th, the Leading Secretaries of city and county parties, the chairman of People’s Assembly, and the chief officers from Safety Bureau and trade officers gathered and held a meeting to discuss ways to stabilize the recent prices of food and goods. The meeting announced the following: “Since the enforcement of this economic policy (the currency exchange) of the nation, people’s standard of living has been lowered drastically because goods and food were not circulated, therefore aggravating public sentiment every day. In order to rectify this, an organization work must be enforced, and each city and county must dedicate itself in reinforcing the control and diligently performing the duty of supervising 100:1 standing committee members. The task of regulating the price of goods as was directed by the state must be finished by April 1st. In order to eliminate the fluctuation of price, the value of foreign currency must be dropped and the value of state currency (North Korean won) must be enhanced. People can enjoy stable life only after the price is under control.”

Drop of Foreign Currency is Linked to Falling Rice Price
While the 100:1 standing committee is expected to stabilize the prices, some experts inside North Korea predict that rice price cannot be stabilized by the work of the committee because its role is only a temporary measure. Some say that the reason for the fall of rice price is not because of 100:1 standing committee, but because of dropping foreign currency. The currency exchange rate was 2,300 NKW per USD on March 4th and it came down to 500 NKW as of March 30th. Exchange rate of US dollar is set in Sinuiju, not in Pyongyang. The sudden dropping of USD exchange rate was due to releasing of government hoarded USD into the market by allowing individuals to purchase it using new NK currency. While this fall of USD exchange rate has helped price of rice and other necessities to fall, some argue, this effect is only temporary and not an ultimate solution. Despite the price fall, the rice is still too expensive for people without money to afford. Also, without a large supply of food from outside, the price would rise again shortly because there is not so much food available inside North Korea.

Large Factories Provide Rations by Selling Pig Iron, Influencing Drop in Rice Price
Currently, rations have only been distributed in Pyongyang for the month of March. In Hamheung, Chungjin and Wonsan, large factories provided food to their laborers by selling pig iron and machines. Therefore, laborers in large factories are not purchasing food from markets due to these provisions, which may have caused downward pressure on rice prices in areas outside of Pyongyang. As of April 1, the rice supply had not reached its maximum, which means that rice prices did not fall due to imports from China or due to hoarded rice released in the markets by individuals, whom safety authorities have already inspected. Therefore, there is no reason for the food situation to improve at the moment.

[Food]
People Die of Starvation Everyday in Sinuiju

People continue to die of starvation at a steady rate in Sinuiju, North Pyongan Province. Countless civilians have been dying due to malnutrition since January in Rakwon 1-2 Dong and Rakchung 1-2 Dong, city of South Sinuiju, where the Rakwon Mechanics Union Company is located. The exact number of deaths is uncertain, but it is estimated to have mounted to 3,000. About half of the population of Sinuiju is being sustained on corn gruel, and still many have nothing. The head of each of the neighborhood units reports the deaths to the village office, who then reports them to the police station. However, they are not permitted to state malnutrition as the cause of the deaths. The heads of the units are under strict surveillance to prevent the word of starvation to spread. The residents of Sinuiju are gravely concerned about the consequences that will follow if the food supply remains at its low level going into mid April. The situation is no better in Dukchun, South Pyongan Province, Kangye, Jagang Province, and Wonsan, Kangwon Province, where many people have been dying of starvation as well.

[Economy]
Experts inside North Korea said “The wrong policy causes a couple of million dollar loss every day”.

“First, after the currency reform, the NK government set the rice price 44 NKW per 1kg of rice. This was the first problem. After the 7.1 economic measures, the price became 44 NKW/kg which was 0.08 NKW beforehand. Even after currency reform, the price was still fixed at 44 NKW/kg. This is against the market price of the rice which was around 25-30 NKW/kg at that time. Thus, the market price skyrocketed up to 100 NKW/kg, 120 NKW/kg, 500NKW/kg, and even to 1,400 NKW/kg around early March. This was the first reason why the wrong policy created confusions in the market.
Second, banning foreign currency exchange since Jan 1st, 2010 was another problem. North Korea doesn’t produce a lot of industrial products and mainly import them. In addition, the domestic currency was very unstable. The banning of foreign currency exchange was announced under these circumstances so the entire commercial circulation halted. What this means is prohibiting raw materials and other base products from being supplied. Eventually, many people died of hunger and the entire nation was put in crisis.
Third, although official exchange rate was set at 30 NKW per USD, the actual price in the market was evaluated at 98.35 NKW per USD. This caused the price of goods to skyrocket and the NK currency to fall. Because of this, those who had US dollars did not go to the bank to exchange money, but to the black market. Thus, the bank has had loss of a couple of million dollars everyday.”

[Politics]
Central Party Security Groups Dispatched to National Border Area to Confiscate Mobile Phones

Central Party Security Groups composed of national security guards were sent to the national border area, including Sinuiju of North Pyongan Province. This year’s inspection in Sinuiju was much stronger than that of previous years. This year’s main focus is illegal mobile phones. Mobile phones sold at state-run stores do not function to make calls to Pyongyang or China, therefore exempt from the inspection. Instead, those who possess phones that are capable of making calls to Pyongyang and China are being severely punished. In previous years, $300 to $500 dollars of bribe was enough to be let off, but this year, victims must pay fines and are banished. Such severe punishments are due to the worry that national security information would flow out. There have been some Chinese descendents turning themselves in at the intricate inspection that involved banishing not only potential spies but also merchants who contacted China through their mobile phones. Such actions are due to the notion that if one turns him or herself in, the fault would be erased and no fines would be collected. In neighborhood unit meetings, there have been advertisements encouraging people to turn themselves in.

[Society]
Conscription this Year, “Girls Taller than 155cm to be Drafted without Exception”
The Department of Military Mobilization begins conscription, targeting graduates of middle school (equivalent of 12th grade graduates) on April 15th. The Military Recruitment Division of the People’s Defense Ministry issued a command to “enlist more male recruits and to recruit females as well if there are not enough boys” to city and provincial military mobilization departments nationwide. The order also directs to conscribe those females taller than 155cm without exception, by giving strong ideological education to those who are not interested. The recruitment was extended to females because the number of people subject to enlistment is small in the first place. Children of railroad-related workers are allowed to work as railroad laborers instead of joining the army.

Fishermen Lament Being Regarded as Means of Earning Money, rather than Husbands
As life becomes tougher, fishermen from the east coast in North Hamgyong Province complain that they are disrespected by their peers since their families disrespect them. Kwanyong Kim, who works at Fisheries Enterprise in Chungjin City, North Hamgyong Province, said “It is an old story that I was respected as a husband or head of household, and now I am just an instrument to make money. It might sound preposterous but there is another story.” He then recounted a story. “A man came back from a month of fishing at sea and he gathered his family members together in order to drink and relax with them. One day, as the current became optimal for fishing, his wife carried her sleeping husband in a wagon to a wharf and boarded him on his ship. The man was unconscious, but soon became confused when he woke up at sea. This phenomenon has occurred in other countries as well. “For example, in Russia, Seokjoong Park (alias) was arrested by Russian guards for trespassing on the sea-border line. He said, “I was imprisoned in a trailer where I could not eat properly and even wash my face.” When Russia released those who had illegally crossed the border, the Security Department asked the man's family to pay the cost of fuel for the ship to transport him back to North Korea. His family and employer declined to pay the fees. As a result, the fisherman then lost will to live, or earn money for his family. Fortunately, the firm that employed him did pay for the fuel, but he was traumatized by the experience.

[Women/Children/Education]
North Hamgyong Province, Junior High School Moves to Hoeryong from Chungjin

The First Junior High School in Chungjin, North Hamgyong Province, has been closed down and Kim Ki-Song Junior High School in Hoeryong city will be turned into the new First Junior High School. The school closing and relocation is one of many strategies to make Hoeryong City, the hometown of Kim Jung-Suk, a better place. Because of the school closing, academically high ranked students and the children of officials have been transferring to Kim Ki-Song Junior High School since April 1. The provincial education department ordered Hoeryong City officials to take care of the students who have transferred from other cities and counties. Despite official support for the school closing, the officials considered the First Junior High School’s move to Hoeryong City to be a burden. As the children of provincial party and police officials have moved to the Hoeryong, the cost of their education must come out of the city party budget. On the other hand, the teachers of the First Junior High School are expecting their financial situation to improve. Since the incoming class is comprised of 70% high officials’ children and 30% children of wealthy families, the teachers are looking forward to steady support from their parents. Teachers, thinking of the extra money such parents could offer, are eager to begin teaching at the new junior high school. They consider the closing of the First Junior High School and the repurposing of the Kim Ki-Song Junior High School to be a stroke of good luck.

[Accidents]
Security Agent Murdered While Trying to Confiscate a Cell Phone in Hoeryong City

In Secheon-Dong, Hoeryong City, North Hamgyong Province, a worker at the local Grain Policy Enterprise has been arrested for the murder of a security agent who was trying to find illegal cell phone users. After an investigation, it came to light that the worker, Kim Kyung-chul, had begged the agent not to report his possession of a cell phone. Mr. Kim said that he had needed the phone to communicate with his brother in China. When the agent persisted in his threat to report Mr. Kim, the worker, knowing the punishment for possession of cell phone, killed the agent with a hatchet.
Three days after the murder, investigators looking into the disappearance of the agent found out that Mr. Kim was the last person to see him alive. Mr. Kim had already burned the body and hidden it in the sewage of the local railway company office. The city security department interrogated Mr. Kim and his wife, who denied the allegations and claimed that they had seen the agent leave their home. Eventually, after interrogating Mr. Kim and his wife, along with his younger brother, the city security department was able to get a confession for the murder from Mr. Kim.
A day after recovering the body, the employees at the City Party, police, and security departments attended a funeral ceremony paid for by the grain policy enterprise that had employed Mr. Kim. Along with Mr. Kim, his wife, and his brother, the security department also arrested his mother and three-year-old son. The family was sent to the “22nd Unit” labor detention center for killing the security agent. The City Party confiscated his house and property. Because this incident is the first homicide case of a security agent, it is rumored that not only Mr. Kim’s immediate family but both sides of his extended family will also be punished.
The City Security Department made a suggestion to Central Party and issued a formal resolution that it would crack down on possession of illegal cell phones in Hoeryong City. To this end, the Security Department launched a campaign in Hoeryong City to make people voluntarily report their possession of any cell phones between April 15th and the Day of the Sun (the birthday of Kim Il Sung).

[Investigative Report]
What is meant by “Every Price Must Be Converted at the Rate of 100:1.”

Recently, the North Korean government has formed a “100:1 Standing Committee” in an attempt to manipulate all the prices. Let’s try to understand the meaning of government’s directives saying, “Every price must be converted at the rate of 100:1.”

1. The problem with a fixed government price
The fixed prices established by the government for rice before the Arduous March was 8 jeon (0.08 NKW) per kg. The monthly salary of a typical laborer was about 100 NKW which was sufficient to buy one ton of rice. However, the price of rice after Arduous March increased to around 80 NKW per kg. The price of rice rose to the level of one month's salary, and the official price of 8 jeon was merely a nominal figure. Subsequently, food distribution and wages were discontinued. Individuals who were excluded from the government distribution system met their needs through peddling at the market and small patch farming. Rice sold in the market became a luxury item for ordinary residents.

2. The North Korean government attempted to narrow the gap between the official price and the market price through the 7.1 Economic Management Improvement measures in 2002. As the prices of commodities rose exponentially the government raised the average monthly salary of laborers from 100 to 2,500 NKW, a 25-fold increase, giving more purchasing power to the laborers. The unrealistic rice price of 8 jeon (0.08 NKW) was raised 550 times to 44 NKW which was about half the price of market price, to make it more realistic.

The level of salary adjustment was not even close to that of rice price adjustment, but the extra purchasing power obtained provided some market stability temporarily. However, the workers' increased purchasing power combined with the absence of an adequate supply of goods triggered inflation. The price of rice increased steadily, surpassing 4,000 NKW during the lean spring season in 2008, then fell back to 2,000 NKW level, which is about equal to one month's salary right before the currency exchange measure.

3. Attempts to make prices more realistic through currency regulations
The North Korean government carried out a currency revaluation at a 100:1 ratio. In contrast to the 7.1 Economic Management Improvement measures in 2002, the face value of monthly salaries was kept at 2,000 to 3,000 NKW and lowered all the prices to 1/100 level. With the circulation of the new currency, the North Korean government declared an officials price for rice at 44 jeon (0.44 NKW per kg). This is 1/100 (one percent) of the previous price of 44 NKW. The distribution price of rice for supporting a family is kept at 44 NKW as before. Although the face value is the same, supporting family members have to purchase food at a price that is 100 times more expensive.

4. New government prices are creating confusion in the market
The distribution price of rice was 44 NKW when the official government prices were announced, but merchants at the market were still applying the 100 to 1 ratio following the currency exchange ratio. The rice price prior to currency exchange was between 1,800 and 2,000 NKW, and the trading price in the market was between 19 and 20 NKW. The North Korean government issued directives saying, “Do not consider prices in terms of 100 to 1. Follow the new government-set prices.” However, because of delays in the public announcement of prices the trading prices at the market tend to follow the before currency exchange price of 1 to 100 level. As a result, residents ignored the government order because the government distribution price was more expensive than the market price.

5. New inflation, issuance of 100 to 1 directive
The currency exchange measure did not solve the imbalance between supply and demand and contained fundamental contradictions. The situation where the market price was lower than the distribution price did not last more than a few days. Prices skyrocketed and the foreign currency exchange rate also fluctuated. Farmers with money in their hand are holding on to grains in preparation of the spring lean season. Merchants in the market are waiting for prices to go up again. The distribution of food and wages promised by the government was soon suspended, and death by starvation caused by food shortages began spreading among the urban labor class.

The ongoing rise of prices and foreign currency will continue because there is no external supply and receipt of foreign aid is very unlikely. While the price of rice was set at 23 NKW on December 9 the value of new currency is dropping continuously, death by starvation is occurring throughout the country, and antagonism against government policy is strong in areas with a high concentration of laborers. The problem will get worse unless commodity prices are lowered by official means.

North Korean authorities had to create the 100 to 1 standing committee and dispatch enforcement agents throughout the country. The agents are responsible for limiting the prices of goods traded in the market within the set prices. The ceiling price for rice is 25 NKW per kg (as of February 1, 2010). This is the highest price among the various trading prices in the market before the currency exchange measure was announced. This is an attempt to embrace the market price prior to the currency exchange measure in order to stabilize the market and calm people’s anxiety, but it is a band-aid approach to solving the problem.
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