Business opportunities in North Korea are gaining traction again these days. “Resources are abundant” and “labor is cheap” are common refrains when it comes to the business potential.
While some, myself included, are quite skeptical about the rosy perspectives of 86’ers, investment and business opportunities do exist and are certainly achievable.
The Nightmare of Kaesong and Mt Keumgang
Yet we have witnessed what happened with the Kaesong entrepreneurs. The Kaesong Industrial Complex closed in February 2016, amid the rapid deterioration of inter-Korean relations under the Park Geun-hye administration, and entrepreneurs have yet to recover from the damage.
What happened with Mt Keumgang tourism was far worse. Hyundai Asan, a chief player, has been figuratively comatose since the fatal shooting of a South Korean tourist by a KPA guard in 2008.
One golf course in the tourism zone had opened just two months previously. The investment which amounted to 80 million dollars is now in limbo.
How to disperse the risks
Investing in the North is a hell of a political risk to take. Worse yet, neither Pyongyang nor Seoul has proven very trustworthy during moments of political tension.
One major auditing firm in South Korea suggests that local firms partner with international agencies to mitigate the risks.
Samjong KPMG emphasized the importance of offering a sustainable development masterplan and cooperating with multilateral development banks (MDB), in its North Korea business strategy forum held last Thursday.
Co-operating with international agencies will definitely help a business to maintain stability in the event of a return to political turmoil.
While a Seoul delegation was only recently able to visit the Kaesong Industrial Complex, aid workers and staff of international agencies have long visited the North comparatively freely.
Larger than profit
Let’s not forget that North Koreans are wary of greedy businessmen from the outside—even those that speak the same language and share the same looks. Something larger than mere profit will be needed to win their trust.
One major example that Samjong KPMG drew upon to support their suggestion was what Siemens did in cooperation with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), a German international development agency.
Siemens and the GIZ offered sustainable urban development plans to several Southeast Asian cities—including Bangkok, Jakarta, and Ho Chi Minh City—with a view to building networks with local governments. Siemens was later able to win contracts in its fields of business, including railway systems, power grids and power plant facilities, a Samjong senior official said in his keynote session.
Too late to wait for
Kim Jung-nam, the senior official in Samjong’s North Korea Business Support Center founded in 2014, said that it would be too late for South Korean businesses to get into the development market after a masterplan is laid out.
As he and other experts at the forum pointed out, future competition in North Korea is not going to favor South Korean businesses. Chinese firms will push forward aggressively. Japanese firms have both capital and technology.
I’ve been watching North Korea issues for some time but am no expert in international development and business so I can’t really tell whether or not this is the way to go.
From where I stand, however, I could say that this seems to be more prudent than other strategies for doing business in North Korea. Actually, this is the first I’ve seen that addresses the political risk innate to this kind of business.