Korea Herald
Chris Gelken
6/20/2006
North Korea is open for business and for the past four or five years has consistently shown that it wants to go forward by welcoming international investment. That is the bullish opinion of Roger Barrett, managing director of Beijing-based Korea Business Consultants.
Barrett was in Seoul to meet with executives of the newly formed Chosun Development and Investment Fund, which recently won regulatory approval from Britain’s Financial Services Authority to begin approaching potential investors.
“Being first into a market isn’t always the best thing to do unless you really understand the risk and rewards. I believe those who are involved in setting up this fund have substantial experience in emerging and developing markets, so I feel very positive,” Barrett told The Korea Herald.
The emergence of this fund came as no surprise to Barrett, despite recent and ongoing political tensions with the North.
“It has been talked about for some time. We have been in touch with investors who have been seeking ways to expand their portfolio of projects in a managed way, and the approval of the fund by the British Financial Services Authority is a big green light to move forward.
“It presents investors with an exciting new opportunity in a market that is little understood,” Barrett said.
The financial sanctions imposed on North Korea last September may have frightened off some potential investors, but not Barrett or his company’s senior investment manager, Adrian Cortez.
“This fund represents one of the first times that North Korea will be exposed to international financial standards,” Cortez said. “I mean even Gaeseong is still more of an agreement between South and North Korea. But now for the first time you have a group of international investors that are going to apply international standards of due diligence. Of course there are going to be problems going into it, but we don’t see them as insurmountable.”
Barrett added that the recent difficulties of moving investments into the North and moving profits out, has eased.
“The bank we work with is the Daedong Credit Bank. As you would expect, they have a diverse range of correspondent banks,” Barrett said.
“Although things were shut down in Macau by what are easily referred to as U.S. sanctions, we have many clients and partners operating from Asia and Europe who are not directly affected.”
Some international investors may also be deterred by recent claims of exploitation of North Korean workers in foreign-invested firms, in particular at the Gaeseong Industrial Park just north of the heavily fortified border.
“You have the quotes that make great soundbites, you have this huge disparity in wages, but with proper monitoring – which the North is reluctant to do but is still being talked about – we may find that the fair wage is $4 a day,” Cortez said. He added that even at that rate some critics may not be satisfied, “but that may actually be a good livable wage for them considering many of their other expenses are cared for.”
Barrett pointed out that many of the workers’ expenses are actually covered by the government.
“In a communist society like the DPRK they get free medical care and education. They actually get quite a lot from the government including housing,” he said, drawing a comparison between the North today and where China and Vietnam were 20 or 10 years ago.
And Barrett believes the North can emulate the success stories of China and Vietnam.
“I am very confident because I believe a market of 23 million people, the same size as Taiwan or Malaysia, presents a lot of opportunity for business combined with the fact that there are a lot of resources of interest to overseas investors.
“All of those factors I think will drive business, trade and investment in a way that everybody can benefit. And I think that is the way forward,” Barrett said.
