But North Korea is very tentatively toying with some capitalist ideas, setting up about 20 special economic zones around the country, allowing farmers to keep and sell more of their produce, and tolerating more nascent activity in the jangmadang, or local markets, around the country.
Although the United States is resolutely not engaging with North Korea on any level, a handful of countries, particularly in Asia, are taking the polar opposite approach. Singapore is chief among them, encouraging engagement with North Korea and North Koreans in the hope of prodding their tentative economic reforms and lessening the gap between the closed state and the outside world.
The Singaporean NGO Choson Exchange, run by former management consultant Geoffrey See, has been training North Koreans in skills that will come in handy in a market economy. Since 2007, it has trained more than 1,000 people in North Korea and almost 100 in Singapore, Malaysia and Vietnam. We wrote about their training for IT specialists back in March.
For the past three months, a dozen North Korean government officials and business people have been doing a “mini-MBA” in Singapore through Choson Exchange, learning about everything from accounting and marketing to human resources and integrated planning. They listened to guest lecturers from global consultancies, had lessons with titles such as “Three problems that can kill your start-up,” and visited companies in Singapore and Malaysia, both of which North Koreans can visit visa-free.
All of the North Koreans were from state-affiliated institutions or ministries, and all had been selected by the regime in Pyongyang to participate in this course.
The course took place as North Korea is promoting special economic zones for more market-oriented experimentation. Although these zones are still very tentative and not making much progress, and North Korea is not exactly sending positive signals to foreign investors, the special zones are being steadily promoted by the regime.
Andray Abrahamian of Choson Exchange, together with a specialist on the North Korea economy, Curtis Melvin, recently wrote that Pyongyang has little to show for even the four highest-priority zones.
Although North Korea’s “serious financial and reputational challenges” to attracting foreign investment are a huge problem, they wrote in a paper on 38 North, a Washington-based website devoted to North Korea, these issues are not the only impediment to success.
North Korea also isn't very good about making clear its plans for the zones, or making plans at all, Abrahamian and Melvin wrote.
But after three months in Singapore, the North Koreans who attended Choson Exchange’s “mini MBA” were talking the talk. The Washington Post attended North Koreans’ final presentations, complete with PowerPoint slide shows, photos of Steve Jobs and fluent English.
Although the presentations all revolved around state-related businesses, it was clear that the North Koreans had taken on board many of the new concepts they had learned during their lessons in Singapore – from the need to use anecdotes to give their pitches a real-life feel to exploiting their “unfair advantages” and using start-ups to “incubate” their ideas.
This is what they said.
Unjong start-up incubator
Mr. Kim, head of the technology and trade research department at the State Academy of Sciences, laid out a plan for a business incubator in conjunction with the Unjong high tech development zone. (The Washington Post was allowed to attend the presentations on the condition that it did not print the North Koreans’ full names.)
A colleague had an idea: They needed a computer-to-plate facility for use in the printing industry to enable them to print magazines and books more easily. But because such products contain large lasers, they are banned from being exported to North Korea under sanctions that prohibit “dual use” products that have both civilian and military applications.
“So our printing houses and companies cannot import this from abroad,” Mr. Kim told the audience at the Singapore Management University, which comprised his fellow students, some of the course lecturers and others with an interest in North Korea.
After considering the idea, Mr. Kim’s team decided this project was ripe for incubation.
“We supplied the necessary funds and working space and we organized meetings with domestic investors and mentors. We succeeded in the development of this product and also with the marketing,” he said, although he didn't elaborate on how they got around the laser problem.
As he made his presentation, he flashed photos on the screen of customers and pitching to investors.
“In our incubator space, scientists and technicians can be provided opportunities to pitch their business ideas to investors and mentors, and also the chance to meet with domestic and foreign investors,” Mr. Kim said. He talked about “unique value propositions” and laid out plans for “start-up bootcamps” and “innovation bootcamps.”
Mr. Kim struggled to provide more detail, and the questions from the audience on whether foreigners can start businesses in North Korea were tricky, as was the question about whether businesses could hire workers from abroad if they couldn’t find people with the right skills in North Korea. (The real answer is basically no: A handful of foreign investors have been allowed to buy into companies in North Korea or start joint ventures, but only in sectors where the North needs outside investment, and control almost always stays with the North Koreans.)
The Chonghyol ring
Got high cholesterol and have to rely on expensive Western medicines to control it? Mr. Jo, a representative of the Chonghyol company, has the solution: a big, flashy ring that he says channels sunshine and purifies the blood, stripping out the lipids that cause high cholesterol.
“It’s cost-effective, convenient and safe,” Mr. Jo said, telling a story about his company’s chief technology officer and his problems with high cholesterol. (Marketing anecdote? Check.)
As he talked about the advantages of the Chonghyol ring over traditional medicines, he put up photos of fat white guys (presumably Americans) and hamburgers (definitely American). The treatment carried no side-effects and involved no stress, unlike hospital treatments, he said.
Ten thousand patients in North Korea and Russia have already used the ring, Mr. Jo said, claiming a 98.8 percent rate of effectiveness. (Questioned later on whether the trials were clinical and how they measured efficacy, Mr. Jo stumbled but said all were happy customers.)
With patents for the ring’s technology, Mr. Jo estimated the ring had a potential market of 8.4 million in North Korea and 53.6 million in Russia, based on the number of middle-aged people in both countries. The ring would be marketed at about $50 a pop, Mr. Jo said.
In his presentation, he put up slides showing the effect and convenience quadrant for competition environment, the revenue model and the “go to market” strategy.
He talked about how the company could tout its product through word of mouth and through social media (even though ordinary North Koreans have no Internet access).
Asked for feedback on Mr. Jo’s pitch, members of the audience suggested that the company promote the ring as a preventive measure, which would make the potential market much larger because they could sell it to people seeking to avoid developing high cholesterol in the future, rather than just targeting those who already have problems.
One audience member also told Mr Jo that, if his product really worked, he could charge much more money for it.
Once upon a time, a fisherman fell sick and couldn’t recover. A group of crabs came into his cottage and smothered him with mud from the lake. Suddenly, he recovered!
So began the presentation by Mr. Kang of the Wonsan Zone Development Corporation, a special economic zone on the east coast of North Korea.
Wonsan has been singled out for development in recent years as North Korea has tried to attract more tourism, with a new hotel and a new airport among the attractions. (However, there are no international flights into Wonsan, and the 100-mile journey overland from Pyongyang takes a good three hours because the road is in such disrepair.)
But the options for medical tourism were limited, said Mr. Kang, who in his smart navy suit and silver tie could easily pass for any businessman in Asia. He laid out a business plan for the “Sizung PeloClinic,” North Korea’s answer to the mud-wrap resorts of the Dead Sea and Napa Valley.
“Our customers would be middle-aged customers suffering from diseases like nervous or digestive system disorders or bronchial problems or arthritis and so on,” he said. "Young people can come for the fresh nature and beauty.”
The clinic would also try to attract foreign tourists visiting the region, he said, with opportunities for yachting and fishing. North Korea would need to build a new hotel capable of accommodating 250 people, requiring $2 million in foreign investment.
“We plan to develop this zone into a world-standard destination,” he said.
Again, the questions raised problems the North Koreans had not considered. Since the Wonsan zone was quite close to the border with South Korea, would Southerners be able to visit? What would happen with the clinic during the eight or so months a year when it’s too cold to enjoy Wonsan’s beaches?
What about Internet access, asked one young woman in the audience. Young people won’t go anywhere without WiFi, she said. That prompted another participant to chip in with a way to capitalize on North Korea’s technological isolation: market a trip to Wonsan as a way to take a break from the connected world. Much laughter ensued.
A few days later, the North Koreans were on their way home, ready to put their ideas into action. It might be prudent, however, to hold off before booking your summer vacation to Wonsan.
This post has been updated with new figures from Choson Exchange on the number of North Koreans they have trained.