North Korea has long been one the most isolated countries in the world, ruled by a leader who has the potential to start a nuclear war. Which raises the question, how can companies set up shop in North Korea and why would they really want to? Foreign businesses in North Korea are eying one of the last great untapped markets.
The incentive to establish a business presence in North Korea is obvious, experts are saying there is immense potential for business in North Korea.
The long-awaited summit in Singapore, which saw an historic meeting between President Trump and Kim Jong-Un, ended on good terms with some serious potential for advancements. Trump and Kim Jong-Un decided to continue talks for future world relations with North Korea, which could have serious ramifications. This has led some ambitious investors to consider the possibility of opening up shop in the crumbling East Asia country.
At the summit, President Trump discussed visions of what could be the future of North Korea if it pivoted from the current North Korean path of nuclear weapons and tyranny. A Trump Tower, McDonalds, and condominiums on the beach are just a few potential examples of what western influence on the country could look like.
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It’s still highly unlikely that North Korea would so easily open up to foreign business ventures anytime soon. However, there are multiple companies that are already setting up internal divisions to start strategizing an entry into a future North Korean market. Companies with potential to profit in North Korea are even seeing a rise in shares.
A few South Korean law firms are receiving multiple inquiries from businesses who want to start building a presence in North Korea.
It’s important not to forget the considerable sanctions on North Korea from all over the world, including the United States. The tight restrictions are a considerable barrier for companies who currently want to feel out the market potential. Violating international sanctions comes with huge consequences.
Kim Jong-Un probably won’t relinquish any of his unfettered power anytime soon, which makes it risky for companies to gamble their assets in a country where anything could happen. But if the North Korean leader starts making changes like ending the food shortages of the North Korean people and turning over his nuclear weapons, there could be hope.
North Korea is ripe for modernization and industrialization. There is a huge amount of natural resources like iron and rare earths material. The population is full of young people who are eager to become delve into entrepreneurial ventures. North Korea sent employees to work at a joint Industrial Park that was run between the North and South, up until 2016 when the North suspended operations.
A recent study found that almost three-quarters of current company’s in South Korea are eager to open up shop in North Korea should restrictions on the country be lifted.
The issue is that North Korea lacks basic infrastructure to support large operations. The country can’t even keep its power on to support the whole country at a stable rate. There needs to be a complete overhaul to bring about water and power systems that can support both the country and potential businesses willing to start operations in North Korea.
Additionally, North Korea has a history of seizing assets and shutting down operations, which poses a huge risk for potential ventures.
A Chinese mining operation, the Xiyang Group, was ready to start mining after completing work on its first mine in North Korea. Yet, the country quickly decided to remove its employees from the country and seize the mine. The group lost an estimated $45 million from the failed project.
Hyundai was another company that brought operations over to North Korea with its Kaesong Industrial Park, a hub of industry in North Korea. It was a huge opportunity for North Korean workers, however the state shut down the park and froze assets of the South Korean company. Over a billion dollars were lost because of North Korea’s rash decision making.
Nonetheless, there are huge business opportunities for the future of North Korea. In fact, North Korea’s official website has a business section where it claims that it will “become in the next years the most important hub for trading in North-East Asia.” Clearly the country sees the potential to make money off of improving world-relations, and its website reflects that.
North Korea already has a sort of informal business culture developed there, after years of hard times left people to look for ways to sustain themselves. Of course, there’s plenty of work to be done.
North Korea isn’t as isolated as you might expect. In fact, one of the many modernizations the country has adopted includes an app store that is literally in a store. While it’s no Apple App Store or Google Play, the implications are much more significant: North Korea’s Smartphone market is booming, and there is money to be made.
Samsung is one of the many South Korean corporations that stand to profit heavily from entering North Korea, being one of the largest smartphone giants in the world.
Additionally, North Korea has seen an influx of improvements, such as a new airport, large skyscrapers, and improved technology. In fact, there’s even a burger joint that recently opened up in the country, despite the widespread famine suffered by many North Koreans.
The sanctions imposed by the United Nations will likely stand for the forseeable future, however there is a good chance of change coming soon. With the positive talks in Singapore between President Trump and Kim Jong-Un, deals could be happening.
If Kim Jong-Un is willing to give up at least some of his power and hold off on North Korea’s deadly weapons programs, there could be room for negotiations. The United States is the leading country in the endeavor to deal with North Korea. This means the UN could follow suite and lift some of its strict sanctions. Lifting these sanctions will allow North Korea to perhaps oversee huge improvements in its infrastructure. The significance? Companies and individuals from around the world will start to flow into North Korea and bring about change within the country. Not only will the lives of North Koreans improve, but businesses will see huge profits in one of the last virtually untapped markets of the world.
Ian is a student of Business at the Honors College at the University of Alabama.
Contact Ian at firstname.lastname@example.org
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