Starting Points: food crisis

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Apr 2, 2010

Overtures to China may signal opening of North Korea's economy

Image by IsaacMao via Flickr

By Blaine Harden
Friday, April 2, 2010; A10

SEOUL -- Squeezed by food shortages and financial sanctions, North Korean leader Kim Jong Il appears to be reaching out to China and Chinese investors in a way that could mark an extraordinary opening in the insular nation's shuttered economy.

Kim might soon travel to China, according to the office of South Korea's president and U.S. officials. They cited preparations that appear to be underway in the Chinese border city of Dandong and in Beijing. The Chinese Foreign Ministry said Thursday it does not have information on whether Kim will visit China.

Such a trip could help restart six-party talks, hosted by China, aimed at persuading North Korea to denuclearize in return for economic and political benefits.

Kim is also attempting to accelerate Chinese investment and has ordered the creation of a State Development Bank. Officials from the new bank told a South Korean professor last week that they intend to allow the construction of foreign-owned factories in major North Korean cities. This would allow Chinese firms, many of which are running short of low-cost factory workers, access to North Korea's pool of low-wage laborers.

If the investments move forward, they would represent a major policy reversal by the government. For six decades, North Korea has sealed almost all its citizens off from the "poisons" of capitalism.

Outreach to China comes at a time of sharply increased pressure on Kim's leadership.

Image by yeowatzup via Flickr

Inside North Korea, food shortages have worsened because of botched currency reform, which disrupted the private markets that feed most of the country's 22.5 million people. Kim's medical ills also include kidney failure, and he undergoes dialysis every two weeks, according to the head of a state-run think tank in Seoul.

And outside, U.N. sanctions are reportedly limiting the North's ability to profit from weapons sales. State trafficking in counterfeit cigarettes and illicit drugs appears to be dwindling. In addition, large-scale food aid from South Korea has been stopped until Pyongyang agrees to junk its nuclear weapons.

"Through this State Development Bank, North Korea is trying to lure foreign investment in agriculture, ports, railroads and also light industry," said Lim Eul-chul, a research professor at the Seoul-based Institute for Far Eastern Studies. He spent four days in Pyongyang last week, talking to officials from the bank and to Chinese businessmen.

They told Lim that the bank is offering itself to foreign investors as a one-stop investment shop. With its board including senior members of the military and the ruling party, the bank will be able to conduct transactions with foreign commercial banks and invest in major projects, North Korean state-controlled media have said.

"The North is now planning to open foreign-owned factories not just in closed-off special economic zones, but in major cities like Nampo and Wonsan," Lim said. Until now, the government has confined nearly all foreign business operations to sealed-off economic zones, such as Kaesong near the South Korean border. "The military is closely cooperating with the State Development Bank to try to increase foreign investment."

Although the repressive power of the army and security forces remains strong, the North's command-style economy is a ruin. There were unconfirmed reports of starvation deaths in some areas this winter.

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Kim, 68, and showing the effects of a 2008 stroke, is in the early stages of handing power over to his untested 27-year-old son, Kim Jong Eun. But the legitimacy of the succession -- and of the state itself -- is being weakened by the growth of the markets and increased public access to foreign media.

Refugee surveys show that many North Koreans blame Kim's government for food shortages, corruption and incompetence.

"Kim Jong Il doesn't have many cards to play, so there is more and more pressure on him to return to the six-party talks," said Koh Yu-whan, a professor of North Korean studies at Dongguk University in Seoul. "He is also aiming to get investment from ethnic Korean businesses in China."

In South Korea and China, there is widespread skepticism about North Korea's willingness to create modern banking systems and enforce laws that allow foreign companies to operate under standardized accounting rules.

Companies that have invested in North Korean mineral ventures have complained for years of corruption and outright theft by the government.

Special correspondent June Lee contributed to this report.

Jan 7, 2010

N. Korean currency crackdown fuels inflation, food shortages

Image by yeowatzup via Flickr

By Blaine Harden
Washington Post Foreign Service
Thursday, January 7, 2010; A11

TOKYO -- Strong-armed currency reform in North Korea, which has confiscated the savings of small businesses and forbidden the use of foreign money, is now causing runaway inflation and contributing to food shortages, according to several reports from inside the closed state.

Currency reform is part of an aggressive crackdown on free markets by North Korean leader Kim Jong Il.

His government has ordered the closure by the end of March of a large wholesale market in the northeastern port city of Chongjin, according to Good Friends, a Seoul-based aid group with a network of informants inside the country. Another major wholesale market near the capital, Pyongyang, was shut down in June.

After a decade of explosive growth, markets have substantially supplanted the central government as a means of employing and distributing food to North Korea's 23.5 million people. The kudzu-like spread of grass-roots capitalism -- and the government's inability to control it -- has angered Kim and his top lieutenants.

To hobble traders who acquire goods from neighboring China, the government has imposed controls on travel and lodging in border areas, ordered the public not to use the large suitcases that are popular with traders and increased punishment for illegal border crossing.

Image via Wikipedia

North Korea is "not moving toward a free-market economy, but will further strengthen the principle and order of social economic management," an official of the North Korean central bank recently told the Choson Sinbo, a Tokyo-based newspaper that is a mouthpiece for Kim's government.

But reining in the markets is a formidable task, even for North Korean authorities, who preside over what is often described as the world's most repressive police state. United Nations officials estimate that half the calories consumed in North Korea now come from food bought in private markets. Recent surveys of defectors have found that as many as 75 percent of them were involved in market activities before fleeing the country.

At the end of 2009, North Korea moved suddenly to wipe out the wealth of all those who had profited from market trading. It revalued the local currency, the won, while sharply restricting the amount of old won that could be traded for new. The rules, as first announced, made it illegal for citizens to possess more than $40 worth of local currency.

The revaluation triggered widespread anger and rare public protests. The government, as a result, eased exchange limits and increased cash payments to farmers and some workers, according to several accounts from inside the country.

Besides penalizing traders, an apparent goal of the currency revaluation was to slow inflation, which has plagued North Korea for years. But the government's action appears to have backfired, with potentially disastrous consequences in a country that is chronically short of food.

The black-market value of "new" won has reportedly plummeted against Chinese currency, spooking private traders, who have pulled their goods out of markets. Outside economists say suspicion about the value of the won has made residents wary, increasing economic stagnation and worsening food shortages.

The central government held a teleconference in late December with officials in every province, city and county "to discuss how to supply consumer goods to residents in the aftermath of the currency exchange," according to Good Friends.

At year's end, the government also announced a ban on the use of foreign currency. The North's richest private traders kept their savings in foreign currency and used it to import Chinese and South Korean goods for sale in North Korean markets.

But euros, dollars and Chinese yuan are also the preferred currency of the North Korean elite, who used them at state shops to buy luxury goods unavailable to most of the population. The survival of Kim's government, many analysts say, depends on catering to the needs of a few thousand elite officials in government and the military.

The consequences of crimping their lifestyles are difficult to predict, but the South Korean government has expressed concern.

"It is difficult to estimate the threat to us that will arise in the aftermath of the currency reform," South Korean Defense Minister Kim Tae-young said in a year-end message to his country's armed forces.

Uncertainty, inflation and shortages triggered by currency reform come at a time when Kim, now 67 and recovering from a stroke in 2008, is laying the groundwork for a successor.

The rollout of his third son, Kim Jong Eun, 26, as the heir apparent may be gathering momentum, according to the North Korea Intellectuals Society, a defector group in Seoul.

Citing sources inside North Korea, it said that his birthday on Jan. 8 is the subject of a Workers' Party decree calling for a commemoration of Kim Jong Eun as "the other leader of us and our future."

Nov 6, 2009

U.N. Says U.S. Delays Led to Aid Cuts in Somalia - NYTimes.com

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By JEFFREY GETTLEMAN

NAIROBI, Kenya — United Nations officials said on Friday that the supply of critical food aid to Somalia had been interrupted and that rations to starving people needed to be cut, partly because the American government has delayed food contributions out of fears they would be diverted to terrorists.

Last month, American officials said that they had suspended millions of dollars of food aid because of concerns that Somali contractors working for the United Nations were funneling food and money to the Shabab, an Islamist insurgent group with growing ties to Al Qaeda. American officials played down the impact of the delays and said that the food shipments would resume soon, once the American government was assured that the United Nations was doing more to police the aid deliveries.

But on Friday, the World Food Program said, “the food supply line to Somalia is effectively broken.”

United Nations officials said that around 40 million pounds of American-donated food was being held up in warehouses in Mombasa, in neighboring Kenya, because American officials were not allowing aid workers to distribute it until a new set of tighter regulations was ironed out. United Nations officials said the American government was insisting on guarantees that were unrealistic in Somalia, like demanding that aid transporters not pay fees at roadblocks, which are ubiquitous and virtually unavoidable in a nation widely considered a case study in chaos.

American aid officials declined to comment on Friday.

In the drought stricken regions of central Somalia, where entire communities are on the brink of famine, elders said that many children who had been surviving off of the American donations were now dying from hunger.

“We are totally dependent on this food and people are now suffering,” said Ahmed Mahamoud Hassan, the chairman of the drought committee in Galkaiyo, central Somalia. “We have nothing else to eat.”

Somalia is one of the neediest nations in the world — and one of the most complex environments to deliver aid. Ever since the central government imploded in 1991, this parched country has lurched from one crisis to the next, the latest being a vicious civil war between a weak government and an extremist Islamist insurgency during one of the worst droughts in years.

The United States has played a huge role in saving lives by supplying about 40 percent of the $850 million annual aid budget for Somalia. But that aid is often only loosely monitored at best once it enters the country because of the dangers of working in Somalia and the fact that so much of it is a no-go zone for foreigners.

For months now, United Nations officials have been negotiating with American counterparts, trying to agree on language for new rules that would ensure, as much as possible, that American donated food goes to needy people and not to the Shabab. Last month, American officials said they were legally bound to do this, because the American government has listed the Shabab as a terrorist organization, a designation that means that aiding or abetting the Shabab is a serious crime.

There is increasing evidence, according to United Nations documents, that some of the United Nations contractors in Somalia have been stealing food and channeling the proceeds to the Shabab and other militant groups. United Nations officials are currently investigating some of their biggest contractors.

United Nations officials say that other donor nations have been skittish to contribute aid during these investigations, which is another reason for the aid shortages in Somalia. The global recession has also taken a toll on aid operations around the world.

That said, “the United States is traditionally WFP’s largest single donor,” said Peter Smerdon, a spokesman for the World Food Program, “and other donors cannot make up the difference.”

He warned that the food supplies for Somalia were steadily dwindling each month and that by December, “we will completely run out.”

Partly because of the standoff over the new rules and the ensuing interruption in the food pipeline, the United Nations World Food Program recently halved the emergency rations to the more than 1 million displaced Somalis.

United Nations officials said they have been urging the American government to release at least some of the food from the warehouses in Kenya while they work out the new rules. United Nations officials said that even if they wanted to bypass the American government and ship in food from other countries, which would cost millions of dollars, it would be impossible to get it to Somalia in time and that the American sacks of grain sitting in Mombasa was the only solution to averting a widespread famine.

“The urgency of the situation has been communicated,” said one United Nations official in Nairobi, who spoke on condition of anonymity because negotiations were continuing. “Basically, USAID,” the American government’s aid agency, “has to come through, one way or the other.”

Aug 3, 2009

Little Holds Nigeria Back From Food Crisis

By David Hecht
Special to The Washington Post
Sunday, August 2, 2009 8:59 PM

KANO, Nigeria -- The nation blessed with Africa's largest oil reserves and some of its most fertile lands has a problem. It cannot feed its 140 million people, and relatively minor reductions in rainfall could set off a regional food catastrophe, experts say.

Nigeria was a major agricultural exporter before oil was discovered off its coast in the 1970s. But as it developed into the world's eighth-largest oil producing country, its big farms and plantations were neglected. Today, about 90 percent of Nigeria's agricultural output comes from inefficient small farms, according to the World Bank, and most farmers have little or no access to fertilizers, irrigation or other modern inputs. Most do not even grow enough food to feed their own families.

Nigeria has become one of the world's biggest importers of food staples, particularly rice and wheat, both of which the country could potentially grow in large enough quantities to be self-sufficient. Even with the imports, about 38 percent of Nigerians younger than 5 suffer from moderate or severe malnutrition, according to UNICEF, while 65 percent of the population -- roughly 91 million people -- are what humanitarian organizations call "food insecure." They are at risk of waking up one morning to find that they have nothing to eat.

With increased variation in weather patterns, experts envisage far worse to come.

Nigeria is "high-stakes," said William A. Masters, associate head of Purdue University's Department of Agricultural Economics and a specialist in agriculture in Africa. "Malawi's successes or Zimbabwe's failures are small compared to what happens in Nigeria," he said.

The people who have suffered most from Nigeria's unreliable agricultural output are its impoverished neighbors. In 2005, when Nigeria had a bad harvest, traders imported grain from Niger, which borders Nigeria to the north. The increased demand caused food prices to spike beyond what locals in Niger could afford. Aid organizations sent in food aid, but much of it was also bought up by traders and diverted to markets in Nigeria. Nutritional surveys suggest that untold numbers of children died.

Aid organizations say that they are now better prepared for food shortages in Niger and other countries around Nigeria, but that Nigeria itself remains problematic.

"Its economy is so big and complex, we can't really get a handle on it," one senior aid official in the region said on the condition of anonymity because he was not authorized to speak to the media. "The idea of a major drought or other disaster in Nigeria is almost too frightening for anyone to contemplate."

A Wake-Up Call

In theory, Nigeria could cope with a food emergency. The government is supposed to have the capacity to hold 300,000 metric tons of grain in reserve. But in practice, many of the silos for these grains have not yet been built, and those that have stand empty or are half-full.

"At best, the government's capacity is 300,000 metric tons and that capacity is only being half-utilized," said Guido Firetti, a silo contractor who recently took over the job of completing a 25,000-ton silo that has been under construction for more than 15 years.

For many in Nigeria, including some government officials, the global food crisis last year was a wake-up call. Prices of imported food soared, and the country panicked. Fearing food riots, the government announced it would spend $600 million to buy rice regardless of the price. The plan was quickly shelved when it became clear that getting the imported food to the people who needed it would take almost as long as growing the food locally.

The government then shifted gears. The money for importing food was reassigned to food self-sufficiency projects and, according to Nigeria's 2009 budget, the government's spending on agriculture is set to increase. The spike in world food prices, the worldwide recession and the slump in oil prices have spurred the government on, said Salisu Ingaw, the head of the National Food Reserve Agency. "Now we have to become more food self-sufficient," Ingaw said.

Embracing a Small Scale

Corruption is the usual explanation for why this ostensibly "rich" nation remains so underdeveloped. "But corruption is just the tip of the iceberg," said Masters, the Purdue specialist.

Even the most corrupt Nigerian governments invested in some infrastructure projects because they had so much oil wealth, Masters suggested. The problem is that so little of what they invested in ended up working, he said.

One widely held misconception that Nigerian governments fell for, Masters said, is that big farm ventures were inherently more productive than small ones. "Unless they are to be a link in a larger industrial process, the chances are high they will fail," he said "In most cases, large industrial farms don't have the necessary flexibility one finds in smaller family-style farms."

Nigerian development economist Shuaibu Idris said governments have traditionally seen small-scale farmers as backward, "but there is absolutely nothing wrong with a peasant one-man proprietor farm as long as the farmer can learn to adapt to new realities." Small-scale farmers may need to form cooperatives to share the cost of farm machinery and to buy inputs at bulk prices, he said.

That is also the conclusion recently embraced by the World Bank. In January, it approved a new $150 million Commercial Agriculture Development Project in Nigeria designed to support small- and medium-scale farmers.

The World Bank's new project, which is in the form of a loan to the government, will improve rural roads for farmers to reduce high transport costs and provide them with better storage facilities.

The good news is that Nigeria has boundless agricultural potential. Of the 3.14 million irrigable hectares of land in the country, the World Bank says only 7 percent is currently being utilized. And though large tracts of farmland have been lost to desertification, more than half the country's estimated 98 million hectares of arable land currently lie fallow.

"The opportunities for our farmers are enormous if only they were to get the right institutional support," said Sabo Nanono, the head of Kano state's commercial farmers association. "We could feed the entire West African region; we could produce enough rice in just two or three [of Nigeria's 36] states to feed the nation and even to export."

Somehow, the supply chain that feeds 140 million people keeps cranking along. The country has not seen a major famine for nearly four decades, since the Biafran civil war. But Nanono warned that it wouldn't take much to send this vulnerable country -- and region -- over the edge.

"The reality is that if the rains are bad throughout the region or the price of inputs became unaffordable, there could be massive food shortages, and neither the government nor any other institution stands ready to help," he said. "Then only God could save us."

David Hecht's report from Nigeria is part of the Food Insecurity project, a joint initiative of the Pulitzer Center on Crisis Reporting and The Project for Under-Told Stories. View Hecht's audio slideshow on the project here. A companion story airs on "The NewsHour with Jim Lehrer" by Special Correspondent Fred de Sam Lazaro. The Food Insecurity Web site is an interactive portal that features additional articles on food issues that have appeared in The Post and other news outlets. The Web site also gives users the opportunity to engage with journalists directly and to post their own responses, in video and in print.

Jul 17, 2009

Foreign Policy Association: Great Decisions 2009 Spring Updates

Great Decisions 2009 Spring Updates provide up-to-date news about Great Decisions 2009 articles. Download the Updates and distribute them to your discussion group participants!

Rising Powers

Afghanistan and Pakistan

Energy and the U.S. Economy

The Arctic

Egypt

Global Food Crisis

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