Investing in N. Korea lucrative but not for the faint-hearted
Investing in N. Korea lucrative but not for the faint-hearted
By Jeffrey Parker
PYONGYANG (Reuter): Markets in Stalinist North Korea are beginning after decades of isolation to show some potential -- but not for the faint of heart.
For the handful of foreign business executives in what must rank as the world's most reclusive and restrictive nation, daily life is near-total sensory deprivation and emotional isolation.
"I have some friends, mostly in the embassies, and we try to get together for a little fun," an Asian businessman said.
"But it's very boring. Mostly we just drink," said the man, a manufacturer who, like most executives interviewed recently, asked that his name not be used.
Foreign newspapers, magazines and satellite television are banned outside embassy compounds, travel and contacts with ordinary people are severely restricted and, to ensure the rules are observed, someone is always watching or listening.
"One of the biggest problems is the constant surveillance," said a western business consultant who makes regular trips to the Democratic People's Republic of Korea.
On the other hand, executives who have made a go of it say North Korea can offer opportunities -- if one is careful, patient, knowledgeable and keeps expectations in check.
"People here are very disciplined, clear in their thinking, and that's good for manufacturing," said the head of a German venture.
He said his Pyongyang-made men's jackets were as good as anything he has made in China, India, Indonesia or Vietnam.
"Garments and light industry are good here. There is a lot of capacity," he said. "After six years of training our workers, this is a good place. The quality is high. I could go somewhere else, but think of the costs of retraining."
Labor discipline is high and literacy nearly universal, executives said.
Investors from capitalist arch-rival South Korea are keen to take the plunge across the demilitarized zone, the world's last Cold War front, although North Koreans are deeply suspicious of their motives after four decades of military tension.
Seoul on May 17 approved the first industrial joint venture with the north since the peninsula's division at the end of World War II, allowing giant Daewoo Group to invest $5.12 million to make shirts, jackets and bags at Nanpo port.
South Korea also allowed trading firm Kohap to push ahead with North Korean ventures worth more than $6 million.
Outsiders say they are attracted by the largely mountainous north's rich natural resources, ranging from great forests of timber to major reserves of coal, lead, zinc and magnesium.
It has significant infrastructure dating to the heyday of its alliance with the Soviet Union, although the debt-laden communist government has managed few improvements since the Soviet collapse and China's junking of Stalinist economics left Pyongyang virtually friendless.
North Korea's foreign debt in 1993 was estimated by Seoul officials at $10.3 billion, or more than half the figure for its gross national product that year. The alarming debt ratio had risen with each of four consecutive years of GNP shrinkage.
Such dire straits have awakened some North Korean officials to the need to open up their economy to foreign investment -- and stirred hopes of new opportunities for investors.
"Capital is simply used up," the business consultant said. "They realize they are a country abandoned. There is a serious commitment to reform in some quarters of the government."
Recent initiatives include formation of the Rajin-Sonbong free economic and trade zone on the northeast coast near the Tumen River delta, where the United Nations is promoting a huge free- trade and trans-shipment zone on contiguous land contributed by North Korea, China and Russia. Laws similar to China's joint venture statutes are on the books.
"I do think it is an interesting prospect for corporations and direct investment," the consultant said. "You have all the elements that constitute an attractive environment."
Yet problems are rife. Electricity, heat and fuel are in chronically short supply and even food can be hard to obtain. Computers and other technology -- where they exist -- are 15 to 20 years out of date. Information is scarce.
Intellectual property theft is potentially a problem, as evidenced by two cars on display in Pyongyang's industry museum.
They are identical to the Mercedes-Benz 190 except for the star on the hood, which has five points rather than three.
But isolation remains foreigners' main complaint, the German executive said between snippets of frustrating small talk with a hotel barmaid who knew only a few words of English.
"Quality of life? Easy. China is far better," he said.