GoodFriends: Research Institute For North Korean Society

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North Korea Today No. 389, February 9, 2011

[“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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Grain Price Drops due to Food Imports from China
Central Party Emphasizes Trade with China for Food Relief
Trade Officers Allow Deferred Payment to Chinese Traders to Earn Trust
Thwarted Negotiation with the South led to Dependence on China
Trade Officers Welcome Pro-China Trade Policy
More Import-Export Companies Likely to Open in Three Northeast Provinces
All-out Efforts to Secure 2.16 Holiday Rations

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Grain Price Drops due to Food Imports from China
The soaring prices of grain and foreign currency peaked on January 25 and started to drop. The prices of rice and corn, which were 3,200 NK won and 2,200 NK won respectively on January 20th, dropped to 2,200 NK won (rice) and 1,300 NK won (corn) in Pyongyang on the 30th. The exchange rates for the US dollar and Chinese yuan dropped from 3,400 NK won to 2,750 NK won and 515 NK won to 415 NK won respectively. The Central Party interpreted this to be the successful result of the Party assignment to overseas trade offices and individual trade officers. The exact amount of the food import is not known, but it is acknowledged that the imports from those trade officers are fairly robust.

Overseas trade offices were assigned to secure food imports for military provisions and holiday food rations for the laborers in many critical construction sites such as Heecheon Power Plant and Pyongyang 100,000-unit housing project. The officers have made great efforts to achieve the national goals, even if it meant borrowing money from Chinese merchants with whom they have trusted relationships. When asked why they are trying so hard when they themselves must be having a difficult time as well, an officer said, “If you do not achieve the goal, the Party will doubt your loyalty. You might get repatriated, and I am nervous about it. I do not know how I can earn my living if I go back to North Korea. It is better that I stay overseas, working hard, making every effort, and make a lot of money for my country. This way is more rewarding and also good for my own livelihood. So I do my best, even borrowing money, to complete my assignment.” Possibly thanks to these officers’ effort, there was some food distribution, which was then released in the market, resulting in a grain price drop.

Central Party Emphasizes Trade with China for Food Relief
The Central Party is emphasizing trade with China by issuing orders one after the other. The food constraint should be resolved first in order to boost the national economy and make a Strong and Powerful Nation in 2012. The content of the orders usually goes like this: “We should develop our endless natural resource of iron ores and boost iron production to strengthen our trade ties with China.” It ratcheted up the level of the message, saying “We should sell any material resources that can be traded to China and import food to overcome the current situation and improve people’s lives. We should bring foreign investments even if it means we have to give out the rights to expedite the development of mines and other industries to grow our economy as soon as possible.” This is completely opposite to its past protectionist attitude and tight restrictions on natural resource exports for self-sufficient economy. This practically nullifies last year’s regulation that said “Do not waste national resources. Raw materials should be processed and then be exported as semi-processed or manufactured products. Anyone exporting raw materials shall be subject to the law.”

An official from the Central Party said, “The guidelines on trade with China are getting very specific and detailed. I can feel the strong resolution of the Party and its urgency.” For example, the Central Party recently sent out an order: “Trustworthiness is most important in trading with China. In the past, there were many occasions where companies and organizations received materials and money for investment and did not keep their end of the bargain. If you do so, your level of credit drops down, and who in the world would trust you? The Party will punish those who make troubles in NK-China economic relations or breach any agreement, thus making us less creditable. From now on, carry on the NK-China trade in a bold and courageous manner.” This message reveals that the current economic and food crises are extremely serious and that they are desperate and cannot wait until China approaches them with aid and investments. According to the official, “this means that now we need to show our sincerity and resolution (to China).”

In December 2010, the North Korean Joint Venture Investment Committee signed an MOU with the Chinese Department of Commerce and Trade on development projects of Ra-sun exclusive zone and Hwanggeumpyung wood processing factory complex. It is now in an on-going negotiation with China on the extension of the land lease in Wihwa island and Hwanggeumpyung island from 50 years to 100 years. The investment on the Ra-sun exclusive zone amounts to a record two billion dollars based on the agreement that China builds roads and power plants in return for the mining rights. In addition, there is another negotiation going on with China about a 70 year lease of Chungjin harbor, stirring worries whether North Korea is giving away its largest harbor to China.

Trade Officers Allow Deferred Payment to Chinese Traders to Earn Trust
According to the Central Party’s principle to strengthen the trade between North Korea and China, the frontline trade workers started to devise several plans for recovering trust with their Chinese counterpart. In the past, it was normal not to pay full cost of the products even after 2 or 3 years of taking delivery. Now it is totally changed. North Korean trade workers pay some in advance with mineral or marine product then they contract with Chinese merchants as deferred payment. Merchants see that the trade between China and North Korea will be more active, so they are resuming the deals after the repayment. Some Chinese merchants are responding positively to the new approach, and a few agreements have been signed. However, issues such as underdeveloped facilities and lack of energy at the production level still remain. Even in the case of the products first and money later, if the quality is low and the scarcity of the quantity, they are not able to establish their worth as a trade partner.

Thwarted Negotiation with the South led to Dependence on China
One official at the Central Party says, “The internal atmosphere in the Party is perturbed by the enhanced dependence on China in new year”. He goes on to make a direct connection between this massive dependence - like selling land and tradable resources - with the North Korea’s succession issue. His analysis is that the Party is trying hard to solve the food problem in order to set the stage for designating a strong successor and having recognition from the public. He also points out that the Party is not as vigilant as before against China’s encroaching influence, considering the desperate condition of getting help from any country that is willing to help. After China established diplomatic ties with South Korea the relations between the North Korea and China had had grown worse. However, the common perception now is that China is the only option, minimizing any previous animosity that had still existed. At one time, there was a hope of concluding peace treaty with the US through the assistance of South Korea and developing the economy, but it has now become an absurd plan. Some officials explain that as the Unification Bureau of Worker’s Party failed in trade with South Korea, the Central Party began to focus on the relationship with China by going through the cabinet. Trade workers who had supported economic cooperation with South Korea lamented North Korea’s selling of the land and valuable resources to China, especially in light of the historic lands that Korea lost while under Japanese colonial rule. It’s doubly insulting that North Korea has to actually force a reluctant China to purchase her land just to survive. They, however, admits that it is an unavoidable situation of the country.
Since the government’s plan to import 500,000 ton of food from South Korean government under the condition of resuming the Geumgang tourism and of the reunion of the separated family went in vain, there was no option but to choose China. Additionally, the expected food from China failed to arrive on time, so the domestic food condition got worse, and the hardship that people had to go through got exacerbated. One official at the Central Party foresees that “to maintain the power and keep the regime intact, this was an unavoidable step. But it will be increasingly difficult to keep Chinese influence away from North Korea, even if we could solve the food problem and maintain the regime.

Trade Officers Welcome Pro-China Trade Policy

Unlike some Central Party officials worrying the strengthened relationship with China would undermine the independence of North Korea, trade officers working in day-to-day operations welcome the pro-China trade policy. They blame the frequent failure of attracting foreign investments to the loss of Chinese trust in NK due to its unstable and inconsistent national policies. However, they “welcome the fresh change brought by the Great Leader’s order of ‘bold and proactive’ trade with China.” They are relieved that they do not have to worry whether the national policy would change again. According to Jeong Seong-il (alias) who commutes between Shinuiju and Dandong, “People were very concerned when we were studying the New Year’s Collective Editorial, but now everyone is happy to hear the Great Leader’s order (of reinforcing NK-China Trade). They are so excited that all trade companies in the nation can fully operate and invigorate trade with China, bringing lots of food and other necessities and contributing to the making of the Strong and Powerful Nation if the order is well implemented.” Their reaction is in a stark contrast with the reactions of some Central Party officials who said, “The New Year’s Collective Editorial is the official philosophy and policy of the Party, and yet it is completely reversed by the order of the Great Leader. Now we have to set up anew all the overseas policies of every department all over again.”

More Import-Export Companies Likely to Open in Three Northeast Provinces
The Central Party conducted a nationwide survey of food shortage as they continue to receive the news of increasing number of death among the elderly due to food shortage, freezing weather, and disease since the end of last year. After reviewing the reports from investigation teams dispatched to each province they have reached a conclusion that they have to revitalize trade with China after a long deliberation. Following the words of Chairman Kim Jong-il they examined the ways of electing policies for strengthening the cooperation between North Korea and China and increasing the number of import-export companies overseas. As more import-export companies open up in China, more trading officials are expected to be dispatched. Just for the month of January this year, about 4-5 import-export companies newly opened offices in each city of the Three Northeast Provinces. Once the February 16 holiday (Kim Jong-il’s birthday) is over, more trading officials staying in China for a long-term are expected to be there. It was about this time when the directive ordering to reestablish policies to strengthening the cooperation between North Korea and China was handed down. The reports submitted by each government office will be reviewed and released to the officials on February 16. Currently, the overseas representatives dispatched to China’s Three Northeast Provinces are attending an annual meeting in Pyongyang, and they are likely to receive the new polices before February 16.

All-out Efforts to Secure 2.16 Holiday Rations
All the Party institutions, organizations and import-export companies are doing their best to secure holiday food provisions for February 16 (birthday of Kim Jong-il). A plan for massive food provision was set up for Kim Jong-eun’s birthday on January 8th, but the plan was only partially implemented, with food going to select privileged ones as the food import went awry. This failure, on top of the lack of New Year’s Day holiday ration supply, resulted in food price rising and public unrest. Subsequent efforts to secure Lunar New Year provision were also fruitless.

The food prices temporarily dropped when the overseas representatives delivered food every day from January 25 to 31 for their army provision assignment and conscientious relief project. However, the Lunar New Year provision was again extended only to some people such as Security Department officials. It is reported that the food sent from abroad will be distributed for the holiday provision for 2.16 and military provision and provided to Heecheon power plant and Pyongyang 100000 housing construction sites.

Import-export companies in and out of the country are particularly working hard to secure 2.16 holiday provision. They worry that fail to do so will significantly mar the authority and people’s confidence of the Party. Central Party officials said “2.16 provision needs to happen since it can be detrimental to the confidence level of the officials and not just the people.” They also said “(even in the Central Party) there is a high level of concern that famine will reoccur nationwide if there’s no provision made by February 16. Simply put, we order all-out efforts every day since the situation is pressing and urgent.”

Currently, the food price is dropping with a rumor of food influx from China and the expectations of 2.16 holiday provisions shared among people. However, the residents do not feel the price drop yet. People even say living is “worse than dying.” Some people also foresee that the food situation may not be resolved in short-term since the Chinese government has not confirmed the approval of food export. However, government officials and trade officers hope that the situation will improve once the full-scale trade policy with China stabilizes
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