HONG KONG – North Korea is one of the world’s most isolated countries. It is ruled by an unpredictable dictator with his finger on the nuclear button. So, who’s ready to do business there?
Well, basically nobody.
But leading up to President Donald Trump’s meeting in Singapore with Kim Jong Un, which concluded Tuesday with a deal to keep talking, some intrepid businesses and investors have begun considering the possibilities. What happens if North Korea opens its economy, even just a little, giving global businesses a shot as East Asia’s last untapped growth market?
Trump on Tuesday dangled visions of what North Korea could win if it abandoned its nuclear weapons and changed its ways.
“As an example, they have great beaches,” he said at his news conference after the summit meeting. “You see that whenever they’re exploding their cannons into the ocean. I said, ‘Boy, look at that view. Wouldn’t that make a great condo?’ ”
Let’s back up. The chances are slim — very, very slim — to none that North Korea would open up like that in the foreseeable future. Still, some businesses are setting up internal task forces to start drawing up plans, according to lawyers and advisers who specialize in North Korea. Shares of companies that could profit are starting to rise, in what one analyst called the “Rocket Man rally.”
A few big companies have tentatively reached out to contacts in North Korea, said Wook Yoo, a partner at Bae, Kim & Lee, a South Korean law firm. Others have inquired about where to begin. “We have received calls from several companies which are quite interested in preparing future business with North Korea,” Yoo said.
It is not clear how many companies are looking at the idea, or which ones. Company officials are loath to discuss their plans publicly. Initial feelers into North Korea risk violating U.S. and international sanctions, which are not likely to ease anytime soon. Those restrictions have become so tight that investors have stopped early efforts to crack the market.
Even if progress were made, the world would still be dealing with a leader who diverted millions of dollars from his country’s economy to build powerful weapons, leading to food shortages for his people.
Nevertheless, some in the business world find the idea intriguing. The North has a relatively young population and an underground entrepreneurial bent. It has a large amount of resources like rare earths and iron ore. And South Korea has offered the North a modernization plan that includes building railways and power plants.
“This is where the money is to be made,” said Justin Hastings, an associate professor at the University of Sydney who wrote a book about North Korea’s economy. That is, “if you can figure out how not to get expropriated,” Hastings added, citing Pyongyang’s history of seizing assets.
Nearly three-quarters of South Korean businesses would be willing to make an investment in North Korea once sanctions were lifted, according to a survey of 167 companies published last week by the Maeil Business Newspaper in South Korea.
When it comes to business, North Korea is not for the faint of heart. Its economy is half the size of South Korea’s sixth-biggest city. For businesses, electricity and water would have to be secured. Yoo said that North Korea lacked a basic way for foreign companies to resolve business disputes.
Of the few Chinese, Japanese and South Korean companies that have ventured into the North, many have seen their assets confiscated.
Xiyang Group, a Chinese mining company, finished building its first mine there in 2012 only to see North Korea kick its employees out of the country and take over. Xiyang said it lost about $45 million from the project.
In addition, the North’s workforce lacks basic skills, say those who have visited the country.
“The biggest gap that we are trying to plug — and it’s really, really big — is how isolated North Korea has been,” said Geoffrey See, the founder of Choson Exchange, a nonprofit that organizes workshops with North Korean students, academics and scientists. “If you look at other countries that open up, they already have diaspora to bring back know-how.”