Business opportunity in North Korea is again gaining traction these days. Resources are abundant and labor is cheap, we’d been told numerous times about North Korea’s business potential.
While some including me are quite skeptical about 86’ers‘ rosy wet dreams about business in North Korea, certainly there would be things can be achieved in investing and doing business in North Korea.
The Nightmare of Kaesong and Mt Keumgang
Yet we have witnessed what happened with the Kaesong entrepreneurs. As the inter-Korean relations rapidly aggravate under the Park Geun-hye administration, the Kaesong Industrial Complex faced the closure, the damage of which the entrepreneurs have never got back from.
What happened with Mt Keumgang tourism were far worse. Hyundai Asan, a chief player in the field has been figuratively brain dead after the tourism had shut down as a South Korean tourist had been shot dead by a KPA guard in 2008.
One golf course built in Mt Keumgang tourism zone had opened in May 2008 and in two months the tourist shooting incident occurred. The investment which amounts to 80 million dollars in total went limbo.
How to disperse the risk
It’s a hell of a political risk to take. Worse yet, neither Pyongyang nor Seoul has proven to be not so much trustworthy in case of political escalation.
One major audit firm in South Korea suggests to go with international agencies to disperse the risk.
Samjong KPMG emphasized the importance of offering a sustainable development masterplan and cooperation with multilateral development banks (MDB) in its North Korea business strategy forum held on Thursday.
Co-op with international agencies definitely will help maintaining business’s stability in case of resurgence of political turmoil.
While Seoul’s delegation was able to visit the Kaesong Industrial Complex only recently, aid workers and staffs of international agencies have been relatively free to visit the North.
Larger than profit
Let’s not forget that North Koreans are wary of greedy businessmen from outside —even if they speak the same language and share the look. Something larger than mere profit would be needed to win their trust.
One major example which they drew upon to prop up 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 Southeast Asian cities including Bangkok, Jakarta and Ho Chi Minh City sustainable urban development plan to build up a network with local governments. Siemens was later able to win contracts in its field of business including railway system, grid 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 in the development market after a masterplan is laid out.
As Kim and other experts at the forum pointed out, the future competition in North Korea is not going to be in favor of South Korean businessmen at all. Chinese firms will be 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 it’s a way to go or not.
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 the first one I’ve seen so far to address the political risk which is innate to this kind of business.