Op-Ed: Economic Performance and Legitimacy in North Korea

Directors Andray and myself have shared our thoughts on North Korea's transition to a somewhat more economic performance-focused source of legitimacy at the Harvard International Review:

...Through our affiliates and our own interaction with investment-seeking arms of the North Korean government, we have noticed that intra-elite competition for investments, with multiple channels backed by different individuals at the highest levels of the North Korean government, has significantly increased in the last two years.

This leads us to speculate that with a leadership transition underway, such competition marks a shift towards increasing reliance on economic performance as a primary source of legitimacy for the North Korean government. This shift is significant as economic development has taken a back seat for the last two decades. If economic growth is to play a greater role in providing legitimacy for North Korea’s government, it will have a lasting impact on their foreign relations...

Chronicle: Why North Koreans Deserve Opportunities to Study Abroad

The Chronicle of Higher Education recently published an op-ed on why we think North Koreans deserve opportunities to study overseas.

In the early 1980s, Theodore Schultz, a Chicago economist and Nobel laureate, visited a China that was just opening up. Impressed by his translator during the trip, he offered the young man an opportunity to attend the University of Chicago's doctoral program in economics. Thirty years later, the young man, Justin Lin, who helped built one of the top economics department in China at Peking University, became the first chief economist of the World Bank from Asia. Without that scholarship, things might have turned out very differently for Justin Lin, Peking University, and the World Bank.

Today, we have North Korea, an isolated country with young people equally curious about business, finance, and economics, and in a system similar to China's in the 70s or 80s. On my first trip to Pyongyang, in 2007, a student from Kim Il Sung University, North Korea's leading university, told me that she wanted to join a trading company to prove that women can be great business leaders. She asked if I could bring economics or business textbooks for her the next time I visited the country. Her example shows there is a hunger for knowledge in the isolated country. And with international-education opportunities, some of these people could become globally integrated and enlightened leaders.

Investment Laws in the DPRK

In June, Choson Exchange took a fact-finding and training needs-mapping trip to Pyongyang.  The main impetus for the trip was to get a better understanding of the legal structure that the DPRK has in place to govern inbound foreign investment. We found a legal structure that draws heavily on  China's experiences. Our full findings are in this report. Key points include:

- Investment projects categorized into encouraged, permitted, restricted and prohibited categories.

- As in China, foreign enterprises require a local business vehicle to conduct FDI; the primary business vehicles available in the DPRK are limited liability corporate bodies and representative offices.

- The JVIC (Joint Venture and Investment Commission) and other government bodies (if applicable) will review the business scope, capitalization and other aspects of a proposed corporate body prior to incorporation.

- Investment in Rason will be particularly encouraged. According to JVIC, corporate bodies established in Rason can also apply to do business elsewhere in the DPRK.

- The operations and governance of DPRK corporate bodies are set out in law, including scope of activities, investment scale, limited liability, location, management, staffing and repatriation of profits.

- Domestic and Foreign arbitration is the primary mechanism for resolving commercial disputes between DPRK and foreign parties.

- Some ambiguities remain. Will laws be enforced uniformly and consistently?

Full report here.

Occasional Update No. 3 (July 2011)

A Needs Mapping and Training Update North Korean Banker: We want to learn about ETFs and Private Equity... CE Consultant: Why do you want to know about ETFs (Exchange Traded Funds)? You are 30 years, at least, away from developing one! North Korean Banker: For curiosity...I read about it in the Financial Times.

- Meeting in Pyongyang (April 2011)

April Needs Mapping - Successfully Identified Priority Needs and “Best-in-class” Partners

In mid-April, Choson Exchange's Executive Director, travelled to Pyongyang with two management consultants to gain a  better understanding of how the North Korean economic landscape is changing,  North Korean institutions we wish to partner for training and to understand in more concrete terms what capabilities our NK partners want to develop in the next 3 to 5 years.

Institutions we met (a self-selected group) expressed a surprising level of openness with regards to the need for learning from development models from abroad, and for skills training overseas. A list of institutions we met and profiled can be found at http://chosonexchange.org/?p=881 and we have selected key partners who expressed strong interest in training and a focus on providing such opportunities to younger members of their organizations. We apologize for only being able to make a limited amount of information public. Photos from the trip can be found at http://chosonexchange.org/?p=889

June Legal Needs Mapping Trip

Geoffrey again accompanied a team member, who is a lawyer based in Beijing. We are currently working on a report on the laws governing foreign direct investment. The legal structure, we found, is similar to the framework employed in China: the issue of building trust by applying and enforcing these laws fairly and consistently remains the unknown commodity.

The report will be on our website soon.

Scholarships - Selected High-Performing Candidates for Year-Long Study and Internship

We also had a chance to interview and select the first batch of candidates for our study abroad program, in which North Koreans under 30 will receive a year of graduate level education in the fields of macro-economics, business and finance. We were able select from a pool of very promising candidates  - we were somewhat surprised that the process for this has become (relatively) less painful.

Unfortunately, the Singapore side of things has hit some roadblocks. The institution which seemed likely to host the students has decided that this year will be impossible to implement such a program. As such we are actively seeking university partners further afield who would be willing to accept North Koreanscandidates. We are especially interested in the UK or Hong Kong. Any advice or assistance would be very welcome. As always, email us at CEteam@chosonexchange.org

In lieu of a full year academic programs, we have decided to bring these candidates out for a policy study trip instead.

Postponed Programs - June Silicon Valley Entrepreneurship Workshop in Pyongyang

June was to see a delegation of Silicon Valley IT entrepreneurs having several days of workshops and meetings with companies and government officials, hosted by the Korea Computer Center. We had hoped for the opportunity to reach out to a segment of North Koreans beyond the economic policy and finance circles we normally work with, but ran into some visa difficulties for US workshop leaders.

Upcoming Programs - August and September Training Sessions

Rason - In association with Hanns Seidel Foundation, we’ll be conducting a training program in Rason, concurrent with a trade/investment fair. We hope to get a better idea of Rason’s administrative structure and training needs in the economic zone on this trip.

In September, we are also working on an economic strategy training workshop in Pyongyang with relevant North Korean government agencies. We will be bringing down policymakers who work on economic strategy to run a 3 day workshop.

We are also preparing to implement two overseas study trips. Details will emerge occasionally on our website.

Looking for Volunteers and Other Resources

We are also looking for companies and organizations (particularly in the fields of business, finance, economics or law) willing to host unpaid or stipend-receiving interns, preferably in Hong Kong, Beijing,  or Singapore.

As we prepare to launch training workshops in July/August/September/October, we are looking for those with an interest to volunteer and support us. For more information, check out our recent recruitment notice at http://chosonexchange.org/?p=883. Also, financial sponsors are most appreciated as we are currently suffering a deficit in our operations.

Contact Us

This occasional newsletter is brought to you by the Choson Exchange team. To contact us, please email CEteam@chosonexchange.org

Please follow us on twitter! We hear that is where things happen these days. @chosonexchange

Photos from June Consultations Up

We have uploaded some photos from our consultations in Pyongyang in June to our Facebook page. Feel free to take a look!

Recruiting Deserving Students

In this 38north.org article, Geoffrey K. See, executive director of Choson Exchange, charts the process through which students from the DPRK might be selected. There are so many reports of negative experiences involving exchange students who underperform, lack interest or seem to have been sent based on political, rather than academic credentials.

But these "negative experiences seem strange to me when Beijing University professors have told me that their North Korean students are routinely top of their classes, in Chinese, at what is one of the most selective and competitive universities in China," he writes.

Choson Exchange has been involved in a study-abroad selection process for the last several months. Through this learning process we have found that selecting good students is possible. See writes that student selection is much like choosing investments:

• Be Selective: Keep in mind that a bigger pool of candidates exist beyond what is often presented and ensure that candidates are chosen not just on individual merit, but also relative to competing candidates
• Be Disciplined: Walk away from candidates that are simply not up to expectation
• Conduct Due Diligence: There is no alternative to having people on-the-ground conducting the interviews

We hope to continue to improve our model for recruiting North Korean students and recognize the limitations CE and other organizations face in doing so.

Read the full article at 38north.org

Rason to follow the Singapore model?

Choson Exchange has been actively promoting in North Korea understanding and knowledge of Singapore's (and other countries') approach to governance and economic/investment policy-making.

According to the Institute of Far Eastern Studies, North Korea's Joint Venture & Investment Commission (a Choson Exchange workshop partner) has said that "Rason will soon become the entrepot port like Singapore, enhancing the lives of North Korean people.”

I look forward to having tasty Singaporean dishes such as char kway teow and Hainanese chicken rice on my next trip to Rason.

Results from June Meetings & Consultations in Pyongyang

We recently completed another round of consultations in Pyongyang and met with the following institutions:

Joint Venture & Investment Commission

1. Confirmed upcoming training program in August 2. Confirmed on-site Pyongyang-based consultant who will be stationed at JVIC for a month in September 3. Confirmed upcoming overseas policy training to be conducted jointly with planning commission 4. Confirmed upcoming overseas program to be attended by senior JVIC leadership 5. Conducted comprehensive discussion of North Korean investment law and its practice 6. Confirmed cooperation agreement

Foreign Trade Bank

1. Confirmed upcoming training program in August 2. Confirmed cooperation agreement

Embassy Meetings

1. Met with ambassadors and embassy staff at three foreign diplomatic representations for briefings and to discuss joint projects

Academic

1. Kim Il Sung University Law School – Consulted professors to understand how legal training is conducted and how law is practiced in reality 2. Pyongyang University of Science & Technology – Consulted professors to understand progress of programs and how we can assist in joint projects

June Trip - Media & Legal Programs

We will be visiting Pyongyang from June 20 to June 25. We will be travelling with a legal workshop leader and a media-related team. Agenda will involve:

1. Discussions on scholarships and overseas programs and selection of people to involve in programs 2. Media visits to a variety of sectors 3. Follow up meetings with investment-policy bodies which will cover:

- Areas of organization value chain we wish to cover in training workshops - Long-term organization plan and where we want to and can add value - Further consultation on aims of organization and seriousness in building the institution - Fixing timeline for September workshops in Pyongyang

and our legal workshop leader as well as to discuss media-related visits

New Photos Added and Snapshots from North Korea

Wonsan

We have added new photos from our last trip to our Facebook page. You will need to access our Facebook page (see box on the right) to see these photos. Unfortunately, we were too busy with work to take a lot of photos, but we have some shots from Wonsan and Nampo (where we visited the port), as well as an unusual bout of snow in the middle of April on the road to Wonsan.

On this trip, I am reminded of how similar Koreans on both sides of the DMZ are. In one meeting, when I asked my counterparts if they could figure out something, a Director laughed and replied that it should not be a problem because "Koreans are very smart people." A very similar refrain I commonly hear from South Koreans.