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North Korea: Witness to Transformation

Parsing the WFP/FAO Report

by and Steph Haggard | April 5th, 2011 | 06:35 am
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The World Food Program, Food and Agricultural Organization and UNICEF have released their potentially fateful report on the North Korean food situation (formally, “WFP/FAO/UNICEF Rapid Food Security Assessment Mission to the DPRK, March 24 2011”).  Although these assessments are a staple of public discussions on North Korean food security issues, for multiple reasons the balance sheet exercise that is reported is almost surely inaccurate, possibly by a large margin—if taken seriously, the past WFP/FAO reports would imply that North Korea was in almost continuous famine for the past decade, something no one asserts.

Nevertheless, these reports are so central to the public discussion that they are worth parsing.  We provided background on various aspects of the current situation in earlier posts; here we parse the current WFP/FAO/UNICEF assessment.

  • Average PDS rations reported by the North Koreans are now at 380 grams of rice and maize. That’s about one half of estimated caloric requirement, with the rest made up from purchases, support from relatives and—come spring–foraging.  The authorities revealed plans for a gradual phased reduction of those rations over coming months down to 360 grams a day.
  • The idea that the government has either the political interest or logistic capacity to redistribute grain across the country in an equitable and highly-calibrated fashion is sheer fantasy as we have argued in detail elsewhere. Ryanggang, Chagang, North Hamgyong, South Hamgyong, and Kangwon have the greatest number of food deficit counties and have been disfavored by authorities in the past.
  • One proximate cause of the problem are the heavy rains of August/September, which marginally reduced what promised to be a decent harvest. But the real proximate culprit is an unusually cold winter, which will affect the summer harvest of potatoes and winter wheat. The report has little to say about the underlying causes of the food shortages in the cooperative system, erratic treatment of the market, and failure to earn adequate foreign exchange to import on commercial terms (on which more below).
  • At this rate, the PDS will run out of food at the start of the late spring lean season (May to July). But that is where the uncertainty starts. The exhaustion of PDS stocks does not mean the exhaustion of food because of military stocks, which may or may not have been rebuilt; and inventories still held in the hands of private and semi-private traders, both wholesale and retail, as well as farmers. Both deserve elaboration:
  • A further source of uncertainty centers on the lack of any independent monitoring of nutrition status. Both the NGO report and the WFP/FAO/UNICEF team heard reports of rising malnutrition and low birth-weights, but the children surveyed were not randomly selected and could have been used to influence the team in favor of aid.
  • The capacity of the DPRK to import on commercial terms has fallen as a result of weak export earnings and higher international food and fuel prices. The government currently plans to import 200,000 MT of cereals, a reduction of 125,000 MT from the 325,000 MT reported to the last mission in October. As of end- January, the government had imported only 40,000 MT.
  • In this connection, the report may have been unintentionally informative regarding the November 2009 currency reform and its continuing reverberations: it describes behavior (pages 10 and 23) that implies that local authorities are using a shadow exchange rate that has depreciated since the currency reform, just as the black market rate has. And they mention in passing that the currency reform was undertaken to “curb the growth in private enterprise.”
  • The report contains a useful—and to us novel—accounting of the sources of DPRK aid since marketing year 2005/6. The basic story is of declining assistance. But the report conveniently omits the large aid program the US put together in 2008 (500,000 MT), about half of which went undelivered for reasons that remain controversial, at least here in Washington.

The report concludes that the country has an uncovered deficit of 886,000 MT, which is equivalent to 3.68 months of PDS rations for the entire nation. Nonetheless, out of realism (they’ve read our critique of their balance sheet methodology) or because of its focus on the most vulnerable, the report recommends a program of 297,000 MT of grain as well as another 137,000 MT of blended fortified foods. As is politically necessary, the report provides incredible detail on the affected populations, although no one really believes that outside donors will be granted the access to monitor at the level proposed.

But it doesn’t entirely matter; even if some food is diverted it would have the beneficial effect of lowering prices.  The relatively high share of blended fortified food will also help assure that food is provided in a form that will be taken up by the more desperate.  And if we are right—that the hoarding and demonetization of the food economy that appears to be underway is connected to the self-destruction of government credibility associated with the currency reform—aid may burst the bubble and encourage the disgorgement of hoarded stocks.

Given the high level of uncertainty, it seems to us that the costs of not acting outweigh the risks of being played for a sucker. Starving populations are not going to bring the regime down; costs will only be pushed off on the vulnerable. That said, both politics and the ethics of the circumstances dictate a tough-minded set of negotiations on two issues.

  • Monitoring and access questions will have to be addressed in a way that assuages Congressional concerns already raised by Senator Lugar among others; this is a simple political fact.
  • It is time to insist on a dialogue on the larger question of why North Korea is once again in these circumstances. A “chronic emergency” is an oxymoron. North Korea has recurrent food problems because it has refused to tackle the underlying issue of economic reform. We do not need to see a full embrace of the Washington consensus, frayed as it is. But we do need a sign that the North Koreans are willing to think pragmatically and experiment. If we are going to come to the rescue, it is time to force a dialogue on reform.