Investing in North Korea

I’m an avid reader of Time magazine, last month the main article was about making investments in North Korea. The communist state is finally being nice to foreigners, for years it has made a fortune extracting cash from visiting persons. The article stated some of Nokor’s functioning businesses which includes a surplus-produce market, a South-Korean funded watch factory, casinos and hotels in Pyongyang, farming and a steel production plant.

Chris Devonshire-Ellis, a Beijing-based business consultant, was in North Korea a few years ago. During his stay at Pyongyang’s Koryo Hotel he met another foreigner, a Russian business man named Vlad. Vlad said he was in the country to sell tractors to the North Koreans. What was unusual was there were a number of guys around him, turns out to be his team of bodyguards. The North Koreans paid him US$ 1 million in cash — which is why he needed the bodyguards.

North Korea was once the business engine of the Korean peninsula, but years of disastrous central planning has held back the country from modernization.

The U.S. government estimates the North’s per capita GDP to be about $1,800, roughly the same as Zimbabwe’s. Per capita exports are about $60 a year–less than 1% of South Korea’s. Aside from fishing, mining and cement production, the North has only a hodgepodge of functional industries, including, weirdly enough, its animation studios, which have been used by several European companies. The only export industry to flourish is military hardware –which generates US$ 1 billion a year, or about one-fourth of the country’s export income.

After a historic meeting with South Korean officials and after agreeing to denuclearize itself, the North has proven itself to the rest of the world that it can move along to economic reform. A few other foreign businesses are in the country such as Egyptian conglomerate,Orascom, which recently signed a US$115 million deal to buy a stake in a North Korean cement company. And later this month, a British firm will begin offering subscriptions for the first ever North Korea-focused investment fund.

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