From Korea is One:
9th Pyongyang Spring International Trade Fair
15th – 18th May 2006.
Optimism alive despite political tensions
European business group in Pyongyang sees N.K. as an attrative FDI destination.
By Chris Gelken
With political tensions over North Korea’s reported plans to test fire a ballistic missile dominating the headlines in recent weeks, any positive news regarding the North has tended to be pushed to the sidelines. The recent launch of a U.K.-based investment fund directed at North Korea suggests that beneath the tensions, there is still optimism in business circles that political problems can be resolved, and North Korea can become an attractive and profitable destination for foreign direct investment.
One such businessman is Felix Abt, the president of the European Business Association based in Pyongyang. In this email interview with The Korea Herald, Abt said he is confident that North Korea-based businesses will, as they have with previous crises, weather this latest political storm.
Q: What was your initial reaction to news of regulatory approval for the Chosun Fund?
A: Since it is perfectly legal for a British company to do business with the DPRK, it was not a surprise that the British authorities gave regulatory approval. However, the U.S. government will continue putting pressure on foreign banks and other companies to dissuade them from doing legitimate business with the DPRK, or with Iran for that matter.
The Times of London recently ran an article with the title “U.S. pressure threatens U.K. firms in Iran.” [1] Of course, economic and psychological warfare is an old U.S. tactic. Given the size of the U.S. economy relative to that of who they consider the enemy, it is unlike a military war. It is usually relatively painless, risk free and, of course, much less costly.
Q: Have any representatives of the fund been in contact with EBA?
A: I don’t think that the fund has been in touch with any of our members here in the DPRK yet, presumably because they have been concentrating all their energies on getting their regulatory approvals. Perhaps they will now begin contacting us.
Q: It is early days, but how do you think this could change the business environment in Pyongyang, and change the perceptions of investors around the world about doing business with the North?
A: When I worked in Vietnam in the nineties, that country decided to become a “strong and prosperous nation” by transforming it into what it called “a socialist market economy.” I then witnessed the arrival of a number of funds, some of which did extremely well in line with the ensuing economic success story of that country.
Vietnam vigorously embarked, like other Asian tigers before, on massively attracting foreign direct investment and strongly promoting exports. In addition, it overhauled and streamlined its fledgling state sector and allowed and stimulated the private sector to become a formidable economic growth locomotive.
The DPRK’s objective is to become a strong and prosperous socialist nation, too, and introducing and promoting more market elements would have the same effect as in Vietnam.
Moreover, a fast growing, flourishing economy would naturally attract more investment and, in addition, give the DPRK a much stronger negotiating position with the South when the question of a common market or reunificiation comes up.
Q: The fund has already identified natural resources and power supply as its parallel thrusts. How many of your members are involved in these sectors and could directly or indirectly benefit from investment from the fund?
A: The DPRK’s huge competitive advantage is natural resources, some of which may even offer the basis for the development of new competitive industries. Power supply and logistics are crucial for the development of these resources. So it makes sense that the Chosun fund or any other fund gets involved in these areas. Some of us represent companies involved in these business fields and would certainly look forward to cooperating with the Chosun fund. Sharing capital input and risks with a fund will enable companies to invest into more projects or enlarge existing ones.
Q: The fund is confident there will be no banking problems regarding bringing investment into N.K. or repatriating profits? How are EBA members dealing with the current banking problems?
A: Bringing investment into the DPRK or repatriating profits is, of course, possible. With many banks, under U.S. pressure, refusing money transfers, it needs quite some creativity and extra efforts to overcome these important obstacles. DPRK companies as well as foreign businesses active in the DPRK are, however, confident that the current storms, like many before, will be weathered, too.
Q: And finally, while it has been reported that the fund’s executives have broad experience in emerging markets, including North Korea, as a businessman with “his boots on the ground” in Pyongyang, do you have any advice or suggestions that you would like to make to the fund?
A: As the professionals they claim to be, they do not need my advice. I would wish them good luck and the necessary empathy and sensitivity for political matters which would mean, for example, that the capital for their fund should first and foremost come out of countries with which the DPRK has diplomatic relations.
