Sojunification

No doubt many perusers of this blog will have noted that one of the writers is into his coffee and beer. And indeed, the former beverage kicks tea's ass all over the place, while the latter is literally the bedrock of civilization.

Many readers may also have tasted mass produced South Korean sojus as has this same author. He would generally describe them as having notes of industrial cleaner, anti-freeze or grout. Often with a nose reminiscent of molotov cocktails, rat-poison or those urinal pucks. 

We're not great fans of most soju.

It was with typical trepidation that we were coaxed into a 'solidarity shot' recently. (Note that as a male in Asia, this happens.) Surprisingly, it was...pretty dang tasty. Dansamsul turns out to literally have a smooth, buttery taste with afternotes of vanilla and potpourri. Seriously. It's ingredients are just rice and ginseng, but the ginseng doesn't give that earthy bitterness that it often can.

Shot taken by Geoffrey (multiple meanings intended). Stopped for dinner at the highway back to Hanoi. North Koreans pulled out NK soju, Vietnamese waitress pulls out South Korea soju cups. Sojunification!

Shot taken by Geoffrey (multiple meanings intended). Stopped for dinner at the highway back to Hanoi. North Koreans pulled out NK soju, Vietnamese waitress pulls out South Korea soju cups. Sojunification!

It was in a restaurant in Vietnam that served a handful of South Korean products, so we had the chance to do unification shots: Dansamsul pours in Chamisul glasses.

With the craft beer revolution sweeping Asia and a consumer class that gets into artisanal products, one imagines more hand-made small batch sojus coming out of the South. Until such time, Dansamsul reigns as the best we have have tasted.

Note: Geoffrey K. See wants to trademark the term 'Sojunification'. Any counsel on how best to do this would be appreciated.

Meeting North Korean Movie Stars

Walking with the stars

Walking with the stars

Touring the studio grounds

Touring the studio grounds

The closest I have ever been to celebrity-dom was 2 years ago on a business trip for Bain & Co. I was wandering the streets of New Orleans and chanced upon the filming of an episode of True Blood. Being stuffy and boring, it was only after I posted a photo of the scene on Facebook that I realized I was in the proximity of stardom. This all changed recently.

Thanks to Tatiana Gabroussenko, a researcher at Australia National University and scholar on North Korean cinema, I managed to not only stand in the proximity of North Korean starlets, but to even order drinks for them while Tatiana interviewed them! Tatiana had joined a Choson Exchange trip to attend the Pyongyang Intenational Science and Technology Bookfair. Our North Korean colleagues, knowing Tatiana’s interest, kindly arranged for her to interview a scriptwriter, actor and actress of 90s movie “도시처녀 시집봐요” (Urban Girl Goes to Get Married). You can watch the movie here, and hear the title song, incidentally my favorite North Korean song.

"Did you really kiss?"

"Did you really kiss?"

The romantic comedy revolves around a Pyongyang-dwelling lady (played by Ri Kyong Sim) who dates and ends up marrying someone from the countryside (played by Ri Gun Ho). Tatiana, a walking encyclopedia on North Korean films, explained that the movie caused a stir among South Korean scholars when it first came out, as it supposedly showed the first on-screen kiss in DPRK cinematic history…or maybe not. Ri Gun Ho and Ri Kyong Sim laughed as they explained that it was a hug filmed to look like a kiss. And so we solve this 20 year-old controversy. 

The artists we met explained that it was important that their sector better understand “world trends and tastes” and asked us if we would consider exchanges in this sector.

Hanging in Hanoi

Our wonderful Vietnamese student volunteer, Jetty, who helped us bring the North Koreans to an awesome street-side dessert shop.

Our wonderful Vietnamese student volunteer, Jetty, who helped us bring the North Koreans to an awesome street-side dessert shop.

While the media and much of the North Korea watching-world has worked themselves into a 'is there or isn't there not a coup' frenzy, we have been busy running a training program in Vietnam for North Koreans. Not as wild, not as exciting, but we think much more meaningful than squinting over photos trying to say whether some North Korean general appearing in Incheon with bodyguards indicates something. The focus of the program is on land development and property entrepreneurship. Our program fellows seem oblivious to the media frenzy surrounding North Korea at the moment. Here are some photos.

You can run but you can't hide (from Psy) in Vietnam.

You can run but you can't hide (from Psy) in Vietnam.

North Koreans treat the group to ice-cream at the famous Kem Trang Tien ice cream shop in Hanoi

North Koreans treat the group to ice-cream at the famous Kem Trang Tien ice cream shop in Hanoi

Transport in Vietnam sure is eclectic. 3 hours on a boat and 4 in a bumpy busy all in one day.

Transport in Vietnam sure is eclectic. 3 hours on a boat and 4 in a bumpy busy all in one day.


"Asian Games Roundup", or "Wait, What Just Happened?"

"Yoboseyo?"

"Oh, hey, its Pyongyang. We're wondering if you'd be fine with like 3 of our most important guys coming to check out the Asian Games finale thing tomorrow. Maybe there could be an important meeting in what will look like a broom cupboard on the news?"

"Um, yeah. Sounds good! We'll check for tiny rooms in the Incheon area."

OK, so maybe it didn't go down like that. And maybe both sides had days or even weeks of visibility on the high level meeting that took place between North and South last week. But the planning was not most guessworthy element. What might it mean? Why now? What's going on?

Andray took a stab at those questions in an article on 38north.org this week. Click here to read the original, longer version that also tackles what the domestic value of the Koreas' on-field performances hold.

 

On the penultimate day of the competition, notifying Seoul that three of its highest officials wanted to attend the closing ceremony the next day. Seoul granted permission to Kim Yang Gon, Hwang Pyong So and Choe Ryong Hae, sparking a media frenzy and wide speculation about the reasons for the visit. The trio had lunch with South Korean Unification Minister Ryoo Kihl-jae and Defense Minister Kim Kwan-jin. They are reported to have said that Kim Jong Un’s health was not an issue and to have delivered a message of “warm greetings” from Kim Jong Un to President Park Geun-hye. An October surprise, indeed.

That might all be interesting, but did Pyongyang put anything of substance on the table to back up a potential charm offensive? It is not yet known, though something may emerge at high-level talks agreed upon for later this month or in early November. This proposal is also somewhat of a surprise, given that North Korea rejected a similar proposal made by Seoul in August.

Seoul, while looking to shift its North Korea policy somewhat, is wary of moving too fast and has not said much about the visit. If an improvement in relations takes place in the rest of Park’s term, we may be able to point to this meeting as an important part of that process.

The trip certainly signals willingness on North Korea’s part for more direct communication. The factors motivating Pyongyang to make this gesture remain unclear at this point, but it could be a combination of several things.

First, Pyongyang wants more non-Chinese investment and understands, in particular, that its grand plans for Wonsan as a tourist destination will ultimately not get far without South Korean capital and visitors. This is especially true if Japanese connections to Wonsan are not rehabilitated. Promising DPRK-Japan talks earlier this year on the abduction issue seem to have stalled as Pyongyang has delayed a key report due in early autumn. Pyongyang may have decided the chances of getting the abduction issue right are too low to justify the risk. Creating an outreach effort to the ROK could be an alternative.

It could also be a test of Park Geun-hye’s trustpolitik as she comes up on the mid-point of her term: this is around the time that she would need to start an initiative if she wants to see it bear fruit under her administration. However, Park has consistently said that aid and investment into the North would increase if steps towards resolving the nuclear issue were taken. We’ll know later if Pyongyang is able to put anything on the table that doesn’t undermine its ‘Byungjin Line’ (dual nuclear/economic development) but this type of reciprocation is something she feels she can work with. This is a narrow window though, and in initial follow-up talks Pyongyang may just be testing to see what it can get while avoiding the nuclear issue for as long as possible.

If she does appear to compromise, it quickly becomes a test of ROK-US relations. Washington was not so keen on Japan’s solo outreach to the DPRK earlier this year; it likely will not be thrilled if its other key ally breaks ranks as well. Pyongyang is always happy to foment divisions between Seoul and Washington when it can.

Finally, it shows Beijing that Pyongyang is ready to ‘play nice’ with its neighbors. After serious stresses between the two allies in the past 18 months, reaching out to Tokyo and Seoul shows China that the DPRK doesn’t have to be a disruptive force while at the same time signaling that Pyongyang may not always be as beholden to China’s economic might as it is today.

Sports diplomacy only works when both governments are actively seeking some sort of shift in relations that an athletic event can help facilitate. It is far from clear that this is what is happening, but suddenly it is a prospect that we are now compelled to watch.

Even if this new North-South dialogue goes nowhere, for both countries the Asian Games will leave a domestic legacy—this is particularly clear in the North, where the victories will be featured and used to justify the sports policy and promote nationalist sentiments. Southerners will join the list of griping citizens around the world who get stuck with the bill for costly sporting events while corporate sponsors walk away with the profits. At the same time, there will be some residual feel-good factor from besting Japan in the medal table and further cementing the ROK’s status as a regional power.

Athletes from both Koreas have and will continue to make great progress on the field. Let’s see now if their leaders can make a little progress off the field as well.

North Korean Senior Leadership in South Korea

While the media and pundits aggressively speculate on the meaning of army chief Hwang Pyong So, and WPK Secretaries Choe Ryong Hae's and Kim Yang Gon's visit to South Korea, we want to leave you with this picture of our Women in Business program in Singapore in June.

Andray has written one year ago about how North Korea will use sports in its diplomatic outreach, and will follow up with more on the Asian Games soon. And I apologize for saying that September will be an exciting month in DPRK's foreign relations. Turns out that the excitement came a little late...by 4 days.

North Korean female entrepreneurs doing field research on retail concepts and strategies in Singapore. Let the road to unification begin at the Samsung retail corner of a department store. Oh, and while we are on speculation, can we say that Kim Jong Un could be seeking a summit with Park Geun Hye?

Pyongyang International Science & Technology Book Fair 2014

With our colleague Ryan in Pyongyang 

With our colleague Ryan in Pyongyang 

Hmmm...what to fill that space with?

Hmmm...what to fill that space with?

September can a busy month in North Korea, as it hosts three international events that overlapped this year. For movie buffs, there is the spiffy not quite red carpet Pyongyang International Film Festival. For businesspeople, there was the Pyongyang Trade Fair and for us, the Pyongyang International Science & Technology Book Fair (PISTBF). Having been represented at PISTBF twice previously, it remains pretty much the same staid affair, except that guests now travel as part of a mish-mash convoy of vehicles.

We heard that the Pyongyang International Film Festival (PIFF) seems to be leading the pack in terms of innovation, with a new format somewhere in between the Oscars and a political lecture. The PIFF organizers decided to jazz things up with a male and female co-host bantering with each other on a set much alike those of modern movie awards, interjected by various performances. But they did not forget to include the odd politician delivering a speech. Some participants expressed nostalgia for the good ol’ DPRK-style film festival. 

Article in North Korean press on book fair. 

Article in North Korean press on book fair. 

We presented EdX at PISTBF. This was a good way for Korean students to access university courses at top universities around the world, when they get Internet access of course. This follows on our presentation on OpenCourseWare and Wikibooks in 2010, which people were fascinated by. We also exhibited books from the London School of Economics, Nanyang Technological University and other publishers. During the evening festivities, we ran into several alumni from our programs in Singapore and North Korea.

Party Secretary for Science & Technology Choe Tae Bok was the guest of honor for PISTBF, along with Chairwoman Kim Jong Suk of the Committee for Cultural Relations. At the opening banquet at the head table, both guest of honors were nested between Russians, and sang Russian songs with them. Russia is featuring more prominently at events in Pyongyang and the mutual courtship looks to be continuing.

Tatiana meets with the stars of 도시처녀 시집봐요

Tatiana meets with the stars of 도시처녀 시집봐요

Outside of PISTBF, we had a packed schedule of meetings with a microfinance company in Pyongyang, architects and urban planners, the Ministry of External Economy and most refreshingly, actors from a famous 1990s Korean movie (“City Girl Goes to get Married” - soundtrack here).  The actors emphasized that it was important for them to understand "world trends and tastes" and asks if us Philistines at Choson Exchange could consider expanding its work to the artistic arena.

We hope that the next PISTBF in 2016 would feature more innovation. Booths should have electricity so that they can do multimedia presentation, perhaps authors can give book talks or organizations can give pamphlets. And definitely, group discounts for hotel bookings. But all that would be an even bigger security nightmare, so I guess this would still be a long way off.  

Japan-DPRK Progress Stalls...

Japanese Press in Pyongyang last week, covering the visit of Japanese coming to visit the graves of family members in North Korea

Japanese Press in Pyongyang last week, covering the visit of Japanese coming to visit the graves of family members in North Korea

The question is, "is it a grinding halt or a temporary slowdown?"

For the past year, Japan and DPRK looked to be on the way towards repairing a relationship frozen since Prime Minister Koizumi’s visit in 2004. After secret talks that led into formal negotiations, Japan relaxed some of its autonomous sanctions when North Korea agreed to reinvestigate the abductions of Japanese. In the chill of DPRK-China relations, frozen ties with the US and South Korea, this was an perhaps unexpectedly bright spot in Korea’s foreign relations. But it seems that progress has stalled again.

Reports by Japanese press indicate that discussions over the preliminary abductee report have broken down. By all indications, the content of the preliminary report, which will be delayed, will not please the Japanese public. It appears that no new information regarding the officially recognized abductees will be released. Japan has signaled that it will reject the results of the preliminary investigation. North Korea has emphasized that full investigations will take a year to complete.

Questions loom on how this breakdown came about. A likely reason could be North Korean displeasure with the degree to which Japan is willing to provide aid in exchange for progress on the abductions issue. In the weeks leading up to this, North Korea signaled desire for further measures from Japan including the delivery of humanitarian aid. On the high end of numbers, North Korean has always tried to secure “war reparations” from Japan, supposedly with some proposals calling for up to $20 Billion.

Or perhaps the powers that be concluded that damaging revelations are not worth the benefits that would accrue from progress here. There are elites who surely believed that the admission of the abductions in the 2000s was a mistake. With Kim Jong Un absent from any public appearances for the last two weeks, possibly from ill health or other more mundane reasons, one wonders if that has impacted the nature of the preliminary report.

North Korea has not closed the door entirely. The reinvestigation supposedly goes on. But the question is whether both sides can agree on a deal. It is truly disappointing to see this happen, and the prospect for improved Japan-DPRK relations, for a moment tantalizingly close, once again seems distant. It is now up to decision-makers in Pyongyang and Tokyo to see if they can can find an acceptable agreement during the delay. If not, one or both governments might just decide the status quo will do.

Feasibility Studies, Project Economics and a Puzzle

Perhaps not a sexy title for a blog post, but important, nonetheless. Because, as one Korean told us:

“We often prepare proposals to potential investors, but they are less interested after seeing them. More than subjective proposals, I understand that items with concrete numbers reflected in cash-flow models are very important.”

-Participant Feedback

In July, a Choson Exchange team traveled to Pyongyang and Wonsan to deliver a workshop titled “Introduction to Cost-Benefit Analysis and Project Economics.” Workshop sessions in both cities focused on the policies and provisions necessary to make investments successful, especially in the context of Special Economic Zones. In the DPRK in 2013 a new SEZ policy was established, as well as a new organizations to oversee them, which have since been in flux. There is a palpable passion for investment and economic issues, but there are significant knowledge gaps and serious misunderstandings about what investors want to see in an SEZ.

The Crowd in Wonsan

The Crowd in Wonsan

Our workshop attempted to address some of these through some basic economics principles, before moving towards project and cash-flow modeling. The basics centered on trade-offs and opportunity cost: the notion that lose what you would have gained from other alternatives when one alternative is chosen. It included this tricky puzzle - 

Please circle the best answer to the following question:

You won a free ticket to see a piano concert (which you cannot sell on to someone else).  An orchestra is performing on the same night and is your next-best alternative. Tickets to see the orchestra cost $40On any given day, you would be willing to pay up to $50 to see the orchestra.  Assume there are no other costs of seeing either performance.  Based on this information, what is the opportunity cost of seeing the piano concert? 

(a)$0    (b) $10   (c) $40  (d) $50           (Source: Paul Ferraro and Laura Taylor)

Don't feel bad if you didn't pick the correct answer, which you'll find at the bottom of this page. Only 21.6% of surveyed participants at an Allied Social Sciences Association (ASSA) meeting got it right, and they were mostly economics Phds. We didn't track individual answers, but in our sessions, a low number got it right. (the author of this blogpost was sadly with the majority)

Once participants mastered the basic principles of economics, the workshop introduced tools private investors use to quantify the value of an investment and analyse decisions: time value of money, discounting, the link between risk and expected return, assessing uncertainty, cash flow modeling and cost estimating. A few keen participants even asked for a demonstration in Excel!

Ultimately, the more complicated content, including accounting for inflation, the time value of money and discounting, project valuation and cash flow modeling led to these key questions:

Why invest?

What makes a good investment? 

Too often, the tools used to assess benefits and risks are not employed by the people tasked with doing trade, attracting investment or developing zones in the DPRK. Nor is there enough understanding of just how much planning based on hard numbers is generally put into investment. Some of the participants were familiar with some of the concepts, but for the vast majority, this was an eye-opening introduction to the thinking that should drive investment decisions.  

The crowd at the Grand People's Study House, Pyongyang

The crowd at the Grand People's Study House, Pyongyang

On a positive note, there was very, very high interest in the topic. The participant numbers smashed CE records for participants in one week: 42 people took part in Wonsan and 86 in Pyongyang. 


Ten bucks. Then answer is (b). For real. Check the internet.

Tech Start PY - Can North Korea create a startup culture?

Korean participants play Angel Investors by investing fake money in ideas other participants created and pitched in a workshop

Korean participants play Angel Investors by investing fake money in ideas other participants created and pitched in a workshop

We just completed a two-week workshop in North Korea as part of our “Tech Start PY” program in August. Tech Start PY is focused on helping build an entrepreneurial culture and a supportive environment for startups in North Korea. 

Tech entrepreneurship in North Korea might seem to be an odd notion. This, after all, is an industry that requires Internet access and smartphone usage. Entrepreneurs also need to be plugged into a highly connected global network of venture capitalists, entrepreneurs, programmers and users to compete at the cutting edge. Despite the handicaps that they face, Korean researchers and businesspeople were keen to learn about the topic and especially how they can commercialize  research. The researchers we interacted with admit that they lack entrepreneurial experience, and hope to gain exposure to entrepreneurs and venture capitalists to bridge the divide between research and industry.

Connectivity is Key

While Korea has programmers who are technically proficient, workshop leaders emphasized that they cannot build successful tech-oriented business without connectivity. They need to be able to see in practice how customers use products on their mobile phones and on the web. They need to see what products are on the market, and need to interact frequently with programmers, venture capitalists and other entrepreneurs to understand where the market opportunities are. Moreover, they need to understand who their competitors are.

This problem became evident during small group consultations we ran, where 2 or 3 Koreans could approach an idle workshop leader during another lecture. A small company pitched an optical character recognition (OCR) software they were developing, which scans images, recognizes characters and converts them into text. They have been developing the product for more than a year, and wanted investors to fund the completion of the product. A workshop leader said 'hey, I have something like that right here,' and showed a year-old OCR app he had on his ipad. The product manager immediately realized that his software would not be competitive with what has been on the market for a year already. The workshop leader suggested that they could partner with a company with an existing product, and carve out a niche by working on Korean text recognition. This, as they understood, would require a degree of research into the field - something they seem not to have been able to do.

We were also proud to be (probably) the first to introduce participants to venture capital firm KPCB Mary Meeker’s excellent report on tech trends.

On an non-workshop day, we were taken to see Unjong Technology Zone, just north of Pyongyang, which the Academy of Sciences ambitiously hope will flourish into a North Korean Silicon Valley someday. One idea we broached during the workshop seemed to fit in with that aspiration.

Incubators as Test Beds

Participants quickly became excited about the concept of an incubator, an environment that would help turn ideas into products. While promoting the usefulness of incubators, we also pointed out that a successful incubator, which brings together startups, technology, support services, funding and training under a suitable incentive structure, is a microcosm of the larger ecosystem they need to create for businesses and investors.

Participants often focus too much on hard infrastructure (e.g. the incubator facilities), and not enough on soft infrastructure (e.g. the networks, mentorship and business environment – i.e. the entrepreneurship ecosystem). The former is a lot more visible as a milestone - certainly in a country with minimal internet access - and easier to set up.  But a workshop leader with policy experience emphasized that the latter is far more important, and far more difficult to create. Some forward-thinking participants were able to grasp the value of an incubator space that would allow them to gain exposure to entrepreneurial skillsets, demonstrating that they were thinking about tackling the soft infrastructure problem already. We are keen to continue helping the Korean participants learn more about incubators, and perhaps support them in setting up one if the conditions are right. 

For the August program, we had a strong team of workshop leaders, including successful venture capitalists that founded companies with successful exits, founders of incubators, and policymakers developing entrepreneurship ecosystems in Asia. The general impression was one of tremendous opportunity once restraints are relaxed.

Around 40-50 Koreans attended the two-week program, and represented a diverse cross-segment of the tech sector, from researchers and aspiring entrepreneurs, to entrepreneurs, business managers, and IT association representatives. Who knows, maybe we'll see some of them in that DPRK-Silicon Valley, working in hoodies, playing foosball on their lunch and taking breaks in nap pods. Or if that's a cultural step too far, at least starting small companies and getting them growing.

 

Pyongyang's September Surprise

The scene of the ALS ice bucket challenge by CE in August.

The scene of the ALS ice bucket challenge by CE in August.

September looks to be a potentially interesting month in North Korea diplomatic relations, in what has been a relatively quiet year.

Just in case you forgot how quiet it is this year relative to last year, remember that Rodman visits have been replaced by lower-key Inoki wrestling, nuclear tests and the March declaration of war footing have been replaced by short-range rocket launches, and the shuttering of Kaesong Industrial Complex has been replaced by bickering over the sending of North Korean cheerleaders to Seoul. It has been a relatively tranquil year... and no major political figures have been executed yet.

So what surprises are in store for September. The month will be kicked off Kang Sok Ju's visit to Europe next week. He will prime European partners on what might be in store for DPRK's diplomatic direction in the coming months. But the real action kicks in further into the month, with Ri Su Yong heading to New York to address the United Nations. While US relations remain in a rut, Ri Su Yong is likely to extend some opportunities for dialogue with the US.

With South Korea, there will be a squad of visiting North Korean athletes heading to the Asian Games in Incheon. As the Ministry of Unification unveils their agenda for North Korea, which contains surprising details on potential infrastructure investment in the North, the event could provide opportunities for announcing public commitments of cooperation. The key question is whether both sides can find enough common ground as each side maneuvers to engage on their own terms. 

And potentially the biggest upside surprise could be between Tokyo and Pyongyang. September is when North Korea is supposed to unveil the findings of its abduction reinvestigations. This unveiling could make or break the positive progress between the two countries. North Korea's delay of the announcement towards the end of the month could help make September end with a bang.

For all you North Korean news junkies, September could be your month!