An Indecent Proposal?

A curious rumor has popped up in Chinese media over the weekend - one which states that North Korea is promoting transnational marriages as a means to attract foreign investment. This financial site, for example, attributing the "Chinese News Net" (中国新闻网), says that for a fee of 300,000 yuan a foreign man can obtain a marriage license in Korea. With the dashing suitor then bonded to a family, he is then expected to make further investments. Failing to do so will result in a 1,000,000 fine.

So far, this difficult-to-believe story hasn't made a splash on the English-language web. Some of the more obvious search terms give results for mostly crappy translation-bot blogs and websites. The only 'reputable' site to carry the story is the illustrious Global Times, which cites a defector group, rather than any Chinese sources for the information. Writes the Global Times:

"The North Korea Intellectuals Solidarity (NKIS), a group of North Korean dissidents resident in South Korea, claimed that entrepreneurs who want to marry North Korean beauties need to pay a deposit of $47,130 to get permission from North Korean authorities, the report said."

The NKIS helpfully goes on offer that "the promotion of transnational marriages at a national level proves that the country is in urgent need of attracting foreign investment to cope with its economic downturn."

First, this story, while possible, seems highly implausible, given North Korea's official view of itself and the value of its homogeneity. It is often claimed that marriage between a North Korean and foreigner is actually illegal, though North Koreans I've asked have said otherwise. That, said the social pressure against such a move would be staggering. To now promote such unions for the good of the nation would not only be a dramatic policy shift, but would be highly contradictory.

Second, it will be interesting to see if this makes it over into English language media in the next couple days. It is after all the kind of thing outlets like the Daily Mail are keen to print.

This story doesn't have the inherent drama of the "Kim Jong Un is dead rumor" that gripped the world back in February, which originated on Weibo and came to dominate a news cycle. But if the "investment wives" story catches some buzz on the Chinese web and then gets picked up by Western outlets, it could be a signal that Chinese netizens are going to act as another - and separate - filter for how we get our North Korea "news".

Female Participation in North Korea's Business Sector

In our workshops in North Korea, we have interacted with a number of highly-educated female managers in state-owned enterprises as well as businesswomen who run their own enterprises. Many of them are both highly capable and excited about growing the businesses they own. They have come a long way, and some even have the opportunity to take their businesses overseas. Haedanghwa, a North Korean restaurant and food business in Beijing, has a female General Manager by the name of Han Myong Hui. The restaurant aims to “provide pollution -free raw materials and seasoning from Korea and ensure unchangeable taste based on the strict hygienic quality management system” which is not too bad a value proposition given the perpetual smog sitting over Beijing. During my first trip to North Korea I met a female university student who talked about how she wanted to go into business and show that females can be good business leaders. In fact, this the initial impetus for setting up Choson Exchange. Females play an important part in North Korea’s business sector, which we attribute to their greater labor mobility compared to male colleagues who have to stay in government-assigned positions. Unsurprisingly, service sectors tend to have a higher representation of female managers compared to industrial sectors.

However, at many levels they are still under-represented. We previously surveyed a North Korean who is familiar with North Korea’s business sector, and found that as we go up the organizational hierarchy, female participation rates fall to 10-15% at the General Manager and more senior levels, compared to 65% at the entry level (we believe they are over-represented here because of stagnant career progression).

Our initial hypothesis was that access to business training and international opportunities could go a long way towards leveling the playing field for female managers in North Korea. We found that at the University of National Economy, a key focal point for business training, only 20% of enrollees are female. Furthermore, only 5% of international business opportunities are given to females. Depending on our ability to fund-raise for such a program, we hope to be able to more actively target this segment in order to bridge the capacity gap.

A program that will ensure a more level playing field should focus on providing networking opportunities, business and leadership skills training, and opportunities for international business exposure.

Visa Free Rason Tourism for Chinese Citizens

Chinese tourists will have visa free access to the border regions linking Yanbian Autonomous Region, Rason Special Economic Zone and Russia, according to a report originating with Jilin Radio that surfaced in South Korean media today. The report doesn't give an date for implementation, but does state that the previous tourism agreement governing the border region (signed in 2010) will be streamlined.  It still takes 10 days for a Chinese traveler to get permission to visit Rason. This process will drop to 2-3 days.

If accurate, this could go a long way towards boosting tourism in the SEZ. After all, a Beijinger or Shanghaiian might well be more willing to spend the money to visit the region if they can get two countries in the same trip. At the risk of overgeneralizing, Asian tourists seem eager maximize passport stamps above all else on international tours. This desire could be effectively exploited if Rason and Russia's Primorsky Krai province coordinate their marketing.

Also, now that the road to Rason is paved, the ease with which Chinese gamblers can reach the Emperor Casino and Hotel greatly increases and arguably makes the destination seem more normal and therefore attractive. One wonders if the casino's fleet of crimson humvees, once needed to whisk high-rollers along the laborious dirt road from, will now be replaced by Mercedes or Lexuses. (Lexi?)

Last year, the SEZ experimented with self-drive tours for Chinese citizens, though there has yet to be any follow-up on it.

For westerner tourists thinking of visiting Rason, we recommend Krahun, a company that has had a presence in Rason for over a decade and know the region exceptionally well.

A Week of JVIC

Early last week, the Rason City Administration announced that their inaugural Rason International Trade Exhibition of 2011 was going to have a second incarnation this summer. The invitation has been helpfully uploaded on NKeconwatch. As with the video presentations last year, materials for the trade fair seem to be primarily in English, with Chinese as a distant second. This is indicative of a long term goal to have this trade fair (and Rason more generally) develop as something greater than just a two nation affair. Interestingly, The Rason Exhibition Corporation, founded specifically to organize the trade fair, only has advertised offices in two foreign countries: China and in Singapore. Meanwhile, Kim Yong Nam was on a trip to Indonesia, via Singapore. Kim had with him Ri Kwang Gun, chairman of the Joint Venture and Investment Commission and An Jong Su, minister of Light Industry. The Singapore portion was brief, but the Indonesia portion was largely focused on economic issues.

From the Jakarta Post, largely quoting Foreign Minister Marty Natalegawa:

“There was indeed sharpened focus on economy and trade during the meeting. Not only about investment itself, but there was also interest [on the part of] North Korea that Indonesia could share how to regulate or manage foreign investment in the country. We noted that North Korea’s attention was quite high on the topics related to economic development and investment,” Marty announced at the State Palace after the meeting.

“Talks on this issue were also raised during the meetings of North Korea’s ministerial-level officials with the Indonesian government before President Kim’s visit today,” the minister added.

There were, however, no concrete business agreements made.

Minister Marty described the discussions on investment as at the "exploration level". North Korea is no doubt keen to reestablish what was once a close relationship with Indonesia in the hope of striking large investment deals down the road. Indonesia, by the way, is sometimes lauded as an example of a "Reformist Autocracy" that has managed to avoid a resource curse.

Friday saw the Rodong Sinmun carry a story called "DPRK Official Outlines Investment Environment". Kim Il Sun, who is a section head of the JVIC gave a speech at the Koryo Hotel. Among other things, he said that to "keep apace with the developing world economy which is characterized by cooperation and exchange, the DPRK government has been paying due attention to the expansion of external economic cooperation based on the constant development of the foundations of the self-reliant socialist economy and making active efforts to create favorable environment for investment."

JVIC is the main organ though which FDI is regulated and managed. It is also involved in overseeing the Rason SEZ.

Kim also touted underground resources, saying "rich natural resources serve as a strong foundation that guarantees the development of the self-reliant economy."

We will be most interested to see if the Rason trade fair expands, if Indonesia and the DPRK strike and large deals in the coming months and if expanded trade and self-reliance are compatible. One thing is clear: JVIC seems increasingly in the news, taking a more visible role for both North Koreans and foreigners.

Kim Jong Un Speech 2.0

This week news of Kim Jong Un's second major speech was disseminated in North Korea and required not one, two, but three pictures to commemorate it. The speech was on land management, with that term being used to cover topics as diverse as forestry, agriculture, road construction, urban renewal and mining. There were a number of interesting things about this speech, but a couple in particular stood out as relevant to Choson Exchange.

In the English summary, this stands out:

"The Ministry of Land and Environmental Conservation and relevant institutions should conduct brisk joint study, academic exchange and information exchange with scientific research institutions of other countries and take part in international meetings and symposiums to introduce advanced science and technology, he added."

We've had conversations with our North Korean partners about conducting training sessions on land reform and taxation issues. It doesn't seem  unreasonable to hope that the interest we've perceived on this issue will be redoubled after what seems like an endorsement from the very top.

In the full Korean text posted on Rodong Sinmun, Kim Jong Un also takes some time to specifically address the issue of underground resources. As Geoffrey and I have argued over at The Diplomat, North Korea's vast, untapped resources could create a more marketized and internationalized economy, but serve to maintain existing social and political structures. (Though this is by no means certain.)

Kim begins addressing this crucial sector by saying "We must positively protect and conserve the country's underground resources". He is concerned that "right now, to earn a handful of pennies, the country's precious underground resources are being developed and exported abroad to the point of depletion, instead of taking a long-term view but looking just in front of their faces with a shortsighted perspective that doesn't show patriotism."

As such, the authorities will "strictly set up a system to stop the development of underground resources to depletion or the random or chaotic development of said resources."

This appears, when combined with his public chastisement of officials at an on-the-spot inspection this week, to be something of a warning shot.  Local officials who run things for personal gain will have to start worrying that pressure from the center may be coming to bear. Our workshop leaders have often emphasized rule-of-law issues as related to investment environment and it would be a welcome development to see more consistency across the investment sectors the DPRK wants to focus on.

There is, of course, much to be done. And while this is just a single speech, it is interesting to note that some of our points of focus are on Kim Jong Un's mind, at least.

Kim Yong Nam to Singapore and Indonesia

It was reported this week by KCNA that Kim Yong Nam, the President of the Supreme People's Assembly, is to visit Singapore and Indonesia "soon". Kim Yong Nam has been head of the SPA since 1998, tasked with handling diplomatic relations for the DPRK. But he was also recently elevated to the Presidium of the Politburo of the Workers' Party of Korea Central Committee, which probably gives him greater participation in economic decision-making as well. (Not to suggest he was an outsider before - but he is now more central than ever.)

He also visited Singapore in 1985, when he was foreign minister and again in 2007 and 2009.

Singapore is a top-ten trading partner for the DPRK - ranking varying according to whose guesswork you follow. In fact, a few months after Kim's last trip, a trade deal was signed between the two countries.

Singapore seems like the secondary concern on this trip, however, at least according to KCNA. In the short announcement on Monday, the news agency gave a paragraph on Kim going to Indonesia then a seperate paragraph, reading: "He will also visit Singapore."

Indonesia has had a "long-standing collaboration" with the DPRK, going back to the era of the non-aligned movement, whose members sought a degree of independence from the Cold War superpower rivalry. Sukarno and Kim Il Sung were not insignificant figures in that movement and had friendly personal relations: recall that it was Sukarno who gave Kim Il Sung the gift of a particular orchid he took a shine to during a state visit.

Trade between Indonesia and North Korea has dwindled since their non-aligned days and this trip is likely an attempt to reinvigorate economic ties. Indonesia's experience with restructuring its economy and managing its natural resources after the Asian Financial Crisis will likely also be of interest to Kim. One deal already struck is a media swap. Indonesia and North Korea will exchange television shows, photos, news and also plan to swap journalists at some point.

Kim received a delegation from Laos last week, while Korean People's Army's top brass we're preparing to visit Vientiane. They may have even flown down together. The two countries don't have much to offer each other in terms of investment, but both are very concerned with avoiding being overwhelmed by China's rise.

Perhaps, then, we're seeing a DPRK pivot towards Southeast Asia. ASEAN, after all, subscribes to a doctrine of non-interference in domestic political systems, which suits North Korea as it seeks to diversify its sources for foreign direct investment. Southeast Asia is the logical place to look, since South Korea is fraught with difficulties and Japan has taken itself out of the game.

Or, perhaps at the end of the day, he just wanted to fly Singapore Air instead of Garuda so has to change at Changi airport.

Choson Exchange Director Joins MIT as Research Affiliate

Choson Exchange’s Managing Director Geoffrey See will be joining MIT’s Center for International Studies as a Research Affiliate. In this capacity, he will focus on development issues in North Korea and will be combining knowledge generation with Choson Exchange’s active projects in North Korea. Choson Exchange previously introduced MIT’s OpenCourseWare in North Korea and look to continue bringing innovative approaches to education to North Korea. MIT’s Center for International Studies is a leading academic center for research on security-related issues, and Researcher Jim Walsh at the Center is a leading expert in the field, an active participant in Track II dialogues with North Korea, and is building a highly innovative and exciting team of scholars focusing on North Korea.

Geoffrey believes that “North Korea is a field where innovative ideas and research combined with on-the-ground involvement in the country can be a potent and effective mix. Being involved with MIT will allow Choson Exchange to fulfill our mission of innovating in North Korea by tapping the wealth of economic policy, entrepreneurship and pedagogical expertise at MIT, as well as allowing us to more strongly understand the links between economic development and security issues in North Korea.”

Resource Driven Equilibrium

Over at the Diplomat, Geoffrey and Andray argue that a resource curse in North Korea is something we should be keeping an eye on. Some Excerpts: The idea of the “resource curse,” long debated by development theorists, is helpful in understanding how the DPRK might marketize and yet remain stable. Rather than spur change, a what we might call “resource-driven equilibrium” might develop in North Korea.

Resources can put tremendous strains on the economy’s manufactured goods, by driving up the exchange rate and making exports more expensive. Furthermore, human resources are drawn away from export-oriented industries, further eroding the competitiveness of the manufacturing sector. There are also political consequences associated with a resource boom. When there’s a lack of manufacturing to begin with, a country’s elites are incentivized to fight for control over the resource base, rather than producing wealth by other means.

Both the economic and political pressures brought by control of a valuable resource can be mitigated in a variety of ways, including good governance through strong institutions.

If managing resources and overcoming the so-called curse is a matter of concerted, institutional commitment and the corresponding development of effective economic institutions, North Korea will struggle to avoid the trap, both in economic and political terms.Marketization without good governance could result in a stagnant and isolated economy, much like Burma over the last decade.

North Korea’s system has shown resilience to the encroachment of unofficial sources of news and information that have been growing since the mid-1990s. A more marketized economy with greater engagement with the outside world may allow more outside information in, yet paradoxically serve to bolster, rather than erode, this resilience.

Full article here.

A Question of Leadership

In March, Choson Exchange sent a delegation of financial and legal professionals to Pyongyang to conduct a series of workshops on the finance concepts of Asset Liability Management and Risk Management.  The workshops took place over the course of two days, and generated good discussions about the approach to banking and finance both inside and outside the DPRK.  The anonymous feedback from the attendees generally included comments to the effect of, “this was good, but we need more”. The other major purpose for the trip was to interview candidates for certain academic opportunities abroad.  Prior to arriving in Pyongyang, we had created a shortlist of about 7 young North Korean professionals from a pool of 30 resumes.  On arriving in Pyongyang, however, an official informed me that some of the unsuccessful candidates were quite disappointed about not making the shortlist.  They very much wanted a chance to meet me in person and to be heard.

It is important to be faithful to a process, but there are very few opportunities for North Koreans to study abroad.  I agreed to meet more people, and 7 interviews quickly became 15.  This made the schedule a bit tighter, but was overall quite positive.  I met many bright and eager young people over the course of the interviews.  For those who are not successful this time, they showed themselves to be good candidates for future opportunities.

This raises the question – on what basis are candidates selected?  As a general consideration, we are looking for high achievers: intelligent and accomplished people.  We also want to ensure, as best we can, that the candidates will be able to adapt to and function in a foreign environment.  This often involves an assessment of language ability and interpersonal skills.  Most importantly, we are looking for leaders: candidates that have the capacity to lead change and to spread the knowledge that they have gained to others.

Almost every modern business interview features questions about leadership experience and ability.  The interviewer often starts with a general question about leadership experience, and then hones in on more specific aspects of leadership.

This was the approach that I took with the first few interviews.  The responses, though, were not what I was expecting:

Q: Can you please tell me a bit about some of your leadership experiences?

(uncomfortable shuffle)

A: Ah…I’m sorry, but I don’t have any.

The first time this happened, it took me back a bit.  I admired the candidate’s honesty and sincerity, but thought that he was being a bit too humble.  “But we all have leadership experiences”, I replied.   I then identified several points on the candidate’s resume that clearly involved leadership experience on his part.

I quickly began to appreciate that there is a different cultural perspective on the concept of leadership.  In many cultures, leadership is commonly viewed as a skill set more than a formal role.  It embodies the confidence and ability to lead others, regardless of having authority to do so.  From an early age, we learn that developing and being able to employ such leadership skills is a very positive attribute.

In the DPRK, the concept of leadership appears to be more associated with formal position and authority.  To describe oneself as a leader without such title is presumptuous, perhaps even mildly insubordinate.  It is not to say that young North Korean professionals do not have leadership skills.  They do – but they are reluctant to describe them as such.

In the end, every candidate was able to talk about experiences that demonstrated leadership skills.  Whatever the label, we were talking about the same thing.

This was likely one of the first formal interviews for some of the candidates, and likely the first English interview for almost all of the candidates.  Despite my attempts to make everybody feel comfortable, it must have been a somewhat nerve-racking experience.  At the same time, it was an experience that many of them had the courage to push for.  I left with no doubt about the desire of the candidates to learn things that are new, foreign and challenging to them.

I would invariably ask each candidate why he or she was interested in the opportunity.  “Because”, one candidate told me, “there is so much more that I need to learn beyond what we are currently doing.  This is the way for me to learn it”.

Kim's Pyongyang

Calvin Chua, a London-based architect and member of Choson Exchange, recently wrote this compelling article on Pyongyang architecture for Fivefootway, a magazine focusing on design in Asian cities. Some excerpts:

Architecture and urban planning have always been used as tools to translate abstract political and economic ideas into physical forms. Across political systems, leaders often mark their political legacy through large-scale infrastructural projects and architectural icons. While some of these projects are no more than self-glorifying, many have a long lasting impact on the way residents live and interact and how the city grows and redevelops.

....

...Kim Jong-il, penned a treatise outlining an extensive architecture theory — “Juche Architecture” — based on the country’s primary ideology of self-reliance. In “On Architecture”, he spoke at length about the significance and role of architecture, the design principles and the architect’s qualification. More importantly, he called for the harmony of national virtues and modernity in the design. Ironically, at the time when the rest of the world was caught up with exploring forms in the early ‘90s, the young Kim declared that “the real beauty of architecture lies not in its external form but in its content.”

There are also some great shots of the city as well.