Western Firms Doing Business in N. Korea
Sunday, November 5, 2006; 6:15 PM
BEIJING -- In the midst of tensions over North Korea's nuclear program, a Western company is there searching for oil. Another just bought a bank.
"North Korea is hungry for business," said Roger Barrett, the British founder of Beijing-based Korea Business Consultants, who recently took 11 Asian and European clients to Pyongyang to play golf and make contacts.
A small group of Westerners are taking on the challenge of doing business in the isolated North, hoping to get in on the ground floor as its communist rulers experiment with economic reform.
The obstacles are daunting. A Stalinist dictatorship, bureaucracy and language barriers. Foreign sanctions that block most financial transfers, making it hard to get paid and to get supplies. And now worries that United Nations sanctions imposed after North Korea's Oct. 9 nuclear test could be expanded to a general clampdown on trade.
But the Westerners talk positively about the North as a business environment, with skilled workers and leaders who they say welcome foreign investment.
"They are very skillful and hardworking," said Felix Abt, a Swiss businessman who oversees two ventures in Pyongyang, one that makes business and game software for sale in Europe and another that makes antibiotics and painkillers for the domestic market. "It's sometimes faster to get licenses and necessary approvals here than it is in China or Vietnam."
Barrett said that even as the U.N. Security Council debated the latest sanctions on the North, he got inquiries from investors interested in its rich mineral resources and low-cost manufacturing work force.
"Investors are rushing into China, but labor costs there are escalating, and companies are looking for an alternative," Barrett said. North Korea "has absolutely the capabilities to take off like South Korea."
So far the largest foreign business community in North Korea is from China, its main source of trade and aid.
South Korea accounts for most of the North's foreign investment, with stakes totaling $620 million in an export-manufacturing zone and a resort for foreigners. China's investments total just $31 million, according to the Chinese Commerce Ministry.
U.S. regulations allow American companies to trade with North Korea under limited conditions, though tensions between the governments and lack of diplomatic relations raises the risk of doing business. Britain, Germany, Sweden and other Western governments, meanwhile, have official relations with Pyongyang.
North Korea's foreign trade has risen sharply, though the total was less than $4 billion last year, according to South Korean and Chinese government figures. Trade with the South soared by more than 50 percent in 2005 to just over $1 billion.