Small figures, but significant considering the risk profile of the country. Investors are willing to take the bet because “this is the last frontier,” says Ken Frost, a director of U.K.-based Phoenix Commercial Ventures, an investment firm that brokers deals between North Korea and the West. Current plans include a joint venture to produce DVD players and another to create software and animation. Frost cites untapped resources—the country is rich in a number of commodities, including coal, copper and precious metals—and a highly skilled work force (the literacy rate is 99 percent) as just two of the big draws. Then there’s the cost of labor: the average monthly pay in North Korea is $57.50, versus $100 in China. And, says Frost, there’s location. “Look at this position—you’ve got an ideal trade route to Russia, China, South Korea and so on.”
Of course, as Aidan Foster-Carter, a senior fellow specializing in modern Korea at Leeds University, points out, “there have been many false dawns when it comes to North Korea.” Back in the 1970s, European countries like Sweden extend-ed generous loans—which Pyongyang promptly defaulted on. Later the economy rebounded, thanks in part to massive gold exports. But huge floods in the 1990s plunged it back into crisis, and the death of Kim Il Sung, the Great Leader, in 1994 created chaos. “It became tough for investors to know who was legitimate,” notes Colin McAskill, who runs the London-based Chosun Fund, targeted at commodity and financial ventures in the area.
While nobody would call North Korea today a transparent market, investors say things are getting better, in part because the country is starved—literally—for outside help. Orascom, which has cited the possibility of increased foreign aid now that nuke tension is easing as an encouraging sign for investors, was able to forge a Western-style governance agreement in its construction venture.
Likewise, South Korean manufacturers are eager to do more business at the Kaesong Industrial Complex, a special economic zone just north of the border where some 15,000 North Korean workers churn out close to $100 million a year worth of garments, automotive parts and watches in South Korean-owned factories, with productivity levels that top many other emerging markets.
Experts say the zone could grow much bigger if the United States allowed products from the area to carry a made in south korea label. Assuming that this happens, Western investors will have to duke it out with the Chinese, who have signed 10 major commodities deals with Pyongyang in the past year alone. Clearly, Egyptian cement makers aren’t the only ones thinking about first-mover advantage.
