Tuesday, May 13, 2008

It's Official: Famine is Forcasted for Future

A policy brief by the Peterson Institute for International Economics in Washington, DC recently issued a grim forecast for the economic situation in North Korea. I have summarized the jest of it as follows:

Due to the lack of diplomatic relations with the international community because outstanding issues (nuclear being the top) and the effects of the world-wide food shortage are clearly resulting in surges in the domestic prices of food in North Korea. The report details about how food shortages listed by the DPRK's Food and Agriculture Organization (FAO) may be merely politicizing the losses to obtain more aid or may actually have losses do to with inefficiencies of production, the August floods of 2007, or diversion of grain and such to other markets unofficially. Data is even questioned concerning if the correct amount of grain needed for the North Korean diet because the WFP and FAO have overestimate the population of North Korea and thus the need for grain.

The self-reliance theory and policy of juche can never fully develop to a working situation as the percentage of arable land to people is low and food supply is severely dependant on favorable weather conditions. The brief points out an interesting analysis concerning China's aid/ food export involvement with DPRK. Aggregate food exports certainly increase with the deepening bilateral relations between the two countries but oveall grain exports were flat during 2006 and 2007 due to the nuclear crisis. Because of the sharp increase of food prices over the past three months it is difficult to tell whether China is increasing its imports of food, remaining steady, or trailing from previous quarter intervals over the past years.

Prices and speculations especially in Asia with so many countries curbing exports in order to prevent shortages at home have had a severe effect on the domestic DPRK food price index. Any external disruption of food supply or price is severely felt inside North Korea at the basic level. Data in the policy brief demonstrates how at this time regional and geographical advantages which may assuaged famine in the past bear no advantage currently as even prices and supply in Pyongyang are desperate.

In 2002, the DPRK attempted to allow more economic reforms creating an environment for co-ops and farmers markets, but now the government is trying to regain a hold of grain distribution and trade. An example of recent policies in an effort to exert control on the market and thus keep power includes a ban on all women under 50 from trading in the markets. These new efforts by the government are only spurring the growth of unregulated "alley markets" and influencing the manner of trade along the border with China.

Recommendations from the authors include highlighting how the regime of the DPRK needs to accept aid when presented by the WFP and South Korea in the short term and that other regional countries need to review their rice export bans in favor of diverting some stocks to the WPF for regional stability by feeding North Koreans. As the nuclear talks roll on, the humanitarian assistance recently promised by the US looks favorable.

Be sure to check out the brief if merely to see some of the charts and data.

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