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.