Sticks and Stones

This week CE is having a couple of meetings in Pyongyang, hopefully laying the groundwork for new exchanges in 2014, while taking in the celebrations commemorating the end of the Korean War 60 years ago. They will be bittersweet (even if the form that they take - parades and mass games - will not give that away) because as everyone knows, the war is not yet resolved. Whether you call it the Fatherland Liberation War, 6.25, The Korean War, the Forgotten War or the War to Resist U.S. Aggression and Aid Korea, this tragic event still looms large over everything in the region, from military alliances to stock markets. George Bernard Shaw wrote in his preface to John Bull's Other Island:

"A healthy nation is as unconscious of its nationality as a healthy man of his bones. But if you break a nation's nationality it will think of nothing else but getting it set again. It will listen to no reformer, to no philosopher, to no preacher, until the demand of the Nationalist is granted. It will attend to no business, however vital, except the business of unification and liberation."

Shaw wasn't advocating nationalism, by any means: he regarded it generally as a cause of much strife and violence. (He also once wrote that "patriotism is your conviction that this country is superior to all other countries because you were born in it.") He did recognize that before nationalism could fade into the background of social life, a degree of security in one's identity as a group needed to be addressed and the modern form that group takes is that of the nation.

The two Koreas are as nationalist as anywhere in the world. Its a complicated mess, this fractured nation of Korea, which despite growing disinterest amongst southern youths, still broadly believes that the natural order - a single, unified, independent state - has been disrupted for over a century, first by Japanese imperialism, then by superpower rivalry. Tomes and opuses have been penned explaining and arguing over where the greatest blame should fall in this tortured stalemate.

Rather than seeking to affix blame on this melancholy anniversary, perhaps we should endulge a moment just to imagine an era of reconciliation. At some point, all parties must admit that this situation isn't the fault of any person left alive, forgiveness must be broadly granted and leaderships will have bold compromises to make. We're not there yet: so many things need to shift and be made healthy before Korea's nationality can be fixed. One hopes that as we look back on 60 years ago, we're all also considering ways to get past this status quo. So far we've just been content to leave the injury for a later remedy.

Management Lessons from North Korea

Pyongyang is probably the last place most people look to for management practices to include in the Harvard Business Review. But still, its always interesting to understand the management lessons participants distill from programs. After all, management is one of the tougher areas for participants to summarize their learning. Unlike other technical fields, management is a “soft” subject where learning is most effectively achieved through a mix of observation, practice and reflection. The subject of management came up when I met with a program alumnus. The alumnus mentioned that over the course of several meetings with various business managers in a range of enterprises, he felt that the good managers shared a few common traits:

1. They have strong technical skills relevant to their respective industries 2. They have strong managerial skills and the ability to manage and lead a team effectively 3. They were able to set a vision for the team, and motivate people with the vision

While such lessons might seem banal to those of us bombarded by management-speak everyday, it struck me as interesting. Many program participants have a tendency to focus on technical skillsets and technology as a solution to all economic problems. Thus it was interesting to hear a participant highlight points 2 and 3 as key takeaways from a program.

The Economist on running a CE workshop

We have often received questions on what it is like being a workshop leader for Choson Exchange in North Korea. It is an unusual experience for sure. Surprising fact? North Koreans are well...kinda human too. An Economist bureau chief who helped us run a workshop in North Korea on inflation policies recently wrote about his experience. Some excerpts:

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However, instead of challenging me over The Economist’s view of the world economy, they pumped me for facts—hard facts. Each session ended with notes delivered to me either in English or via my interpreter, with almost desperate demands for case studies from around the world that (I surmised) could be useful for the DPRK. This led to a delicate dance, because discussion of the country’s own economic problems was strictly taboo. The strong wording of the messages themselves seemed to say a lot: “You better tell us in more detail,” said one. “We want more real examples,” said another.

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Without a doubt, the seminar’s participants were part of a privileged elite—but not that privileged. They wore heavy winter gear in late spring because they were literally freezing cold in the cavernous hall as they sat through the lectures. Only I was given a small heater to keep warm, which was hidden behind the dais. One member of the audience who did not realise I had this privilege came up to tell me that I should put on a coat while I gave my lecture. She also brought me glasses of hot tea. Some people seemed wary of talking to me directly. That made such subtle gestures all the more touching.

Shih Tung, another workshop leader, has also blogged about his experience. Some excerpts:

The first workshop I conducted was on Lean Production as part of a Women In Business program. The Women In Business program is one of Choson Exchange's key activities this year and includes workshops held in North Korea as well as study trips abroad for selected participants. Apart from my session on Lean Production, the March workshop also included seminars on the changing role of women in business, marketing and business strategy.

...

Simultaneously with the Women In Business workshop, we also ran a workshop on inflation for officials from the Ministry of Finance and other financial institutions. The former Tokyo Bureau Chief for the Economist presented on recent global economic developents and delivered a macro view of inflation while I discussed the nuts and bolts of how Singapore measures inflation, starting from the Household Expenditure Survey to the Consumer Price Indices (CPIs) for different income groups.

Atlantic Coverage

The Atlantic covers our work. Some great quotes from volunteer Desmond Lim:

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The two-way exchange (Choson is the Korean name for the Korean peninsula) has been cited in the Economist magazine, the Wall Street Journal, and elsewhere in the international media for its work sponsoring internships, educational programs, workshops, and other programs, all in an effort to promote dialogue and mutual understanding.

"Building trust is key," said one volunteer, Desmond Lim, 27, of the group's low-key and gradual approach to creating openings with people in the Democratic People's Republic of Korea.

...

"As Singaporeans, we play a role of middle man," Lim said. "They trust us, and they are keen to know how we grew so fast over the past 30 years, what did the Singapore government do right."

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One of the group's efforts this year is a Women in Business program focusing on young and high-potential female business managers and entrepreneurs. Of the 90 participants involved in programs so far this year, 55 percent were female, the group reports.

"This is one way we can try to help them," Lim said. "North Korea is at a time where they need help, but help is hard to give."

Short CE Mid-Year Update

Two high-tension quarters have passed this year. For anyone reading the headlines, it would be easy to forget that activities supporting access to economics, entrepreneurship and legal knowledge are still going on, and that for all the attention-grabbing headlines, individual North Koreans continue to innovate and develop their own ideas for new businesses they would like to start up. Some of these businesses might someday change the entrepreneurial and business landscape in the country. In the last 2 quarters, our programs have directly reached close to 100 North Koreans with a focus on business skills training for female managers and entrepreneurs through our Women in Business initiative. We have also covered fiscal and monetary topics focused on tackling inflation. Programs have taken place both in country and overseas.

Some program statistics for the ~90 participants overall for in-country and overseas programs in the first half of this year:

~55% female participation for in-country Women in Business program

~73% of participants between 20-40 years old

~14.2% selectivity ratio (1 out of 7) for overseas component

~ 2 workshops and incubation programs overseas and 2 workshops in-country

Land Reform Op-Ed in Rodong Sinmun

Given how we have been occasionally bitched at by North Korean elements for releasing information ahead of its time, this post will instead focus on copying and pasting something from the party newspaper Rodong Sinmun. But its an interesting allegory on land reform, something that foreshadows something that has been in the works for awhile, while stopping short of being an outright policy proclamation.

It Happened before Land Reform

One February day 1946, President Kim Il Sung visited a peasant house in the outskirts of Pyongyang.

Sitting with the peasants who happened to be there, he talked frankly, getting himself well acquainted with their living conditions. Not aware of who they were talking to, the villagers told him whatever they could think up then and there. Listening carefully to the villagers, the President asked whether they had heard anything about the three-to-seven system of tenancy. The host, somewhat bewildered, looked about his folk, and said, "I've heard of it, but I don't…" he equivocated.

"How much tenant fee did you pay the landlord last year?" asked the President. "You say you paid 50 percent of your harvest as a tenant fee. You know you had to pay 30 percent. Go and take back the amount exceeding the 30 percent."

The peasants looked a bit surprised because it would be more than they could have the courage to do, they thought it was the last thing they could ever do to bring back the remainder in their tenant fee from the landlord.

Smiling softly, the President said the three-to-seven system was what the state had enforced for the peasants and so there was no reason why they should hesitate to get the remainder back. What the President said seemed not to be understood to the peasants. They suggested that the state should take the excess back for them. The President asked whether a peasant association had been organized in the village or not. There was no reply as the peasants all kept mum. As a matter of fact, a peasant association was there, but it failed to do its bit and the peasants turned their back on it. Some peasants even withdrew from the association for fear that they should be deprived of their tenanted land. The President told them to rally the peasants in the association and fight bravely to get 70 percent of their harvest.

Thanks to the great care and leadership of the President the peasants gradually grew into true masters of land and the masters of the people's power.

Successful SEZs

With the (temporary?) closure of Kaesong Industrial Complex, the future of special economic zones (SEZ) in North Korea looks grim. In China, where one-stop shops that help investors navigate processes increasingly replace SEZs, what role can SEZs play in North Korea? If North Korea reinvigorates its SEZ policy in the medium term, what does it need to do to make progress? Some ideas:

Execution While the strategic rationale and planning of SEZs is important, studies of SEZs by the World Bank indicate that a lot boils down to the execution of the SEZ concept. Well-executed SEZs produce results, and such zones often require local zone administrators that have the autonomy and the political support to cut through bureaucratic red tape.

Integration Traditionally, SEZs in North Korea have been located far from the key urban centers. The isolation cuts them off from domestic economic activity. However, SEZs that have generated significant externalities for the national economy often benefit from and transfer their advantages through integrating their activities with the regional economy.

Contextualization Overseas investors, for right or wrong reasons, worry about North Korea’s economic and political trajectory. Many are hesitant to commit significant capital to a challenging market. As such, a short-term approach could be to focus SEZs on supporting domestic entrepreneurs. A liberal and credible zone approach could target domestic North Korean entrepreneurs, enabling them to set up companies domestically, rather than offshore, and help develop a set of rules governing the next-generation of domestic companies. These rules can then be rolled out more extensively if successful.

Koryo Song Gyun Gwan Opens

In the DPRK, where legacy counts for so much, a ‘Song Gyun Gwan’ has been “re-founded” in Kaesong. Originally a 10th century school for training high officials, the name has been revived in the form of a college of light industry.

IMG_0160

We saw that the campus was under construction last summer and now a Pyongyang magazine reports that it is finished and now running. The design of the rather large main building contains traditional elements with more contemporary ones.

Reports emphasized the school’s research into traditional products from the region, with ceramics, spinning and weaving, ginseng and food science departments. However, the ‘light industry’ tag and the variety of other more technical departments suggest that the school could operate as a platform for supplying more highly skilled workers for the Kaesong Industrial Complex, perhaps even for the management level.

Assuming that this period of tensions passes and that the Kaesong Industrial Complex reopens and eventually grows, it is not impossible that Kaesong could become something of a light industry hub for the DPRK, with the educational facilities and then employment opportunities to attract people from around the country. However, while it is positive to see a potentially valuable resource being founded outside the capital, it will probably remain marginal at best if the KIC doesn’t survive this period .

Third-wave Coffee hits the DPRK

A very pleasant discovery this March is that there is what you might call a third wave coffeeshop in Pyongyang. (For those of you unfamiliar with the term, ‘third wave’ essentially means thinking about coffee similarly to wine: concern for terroir, freshness and individual, hand-made drinks. It's pretty bougy.) This un-named café is attached to the Pyongyang Hotel View Restaurant. It is the first one in the DPRK with single origin beans, pour-overs and even a small roasting machine, as far as we know. 

This amounts to a quantum leap in coffee quality in the capital city. Espresso is available at certain restaurants and there is an Austrian coffeeshop tantalizingly close to Kim Il Sung Square but sadly, without a view.

The pour-over we had was unfortunately a bit off. The grind was too coarse and the beans slightly out of date by the standards of third wave cafes elsewhere. The espresso, however, was excellent, bursting with caramely and nutty flavors. The cappucino was good, also.

Though we haven't seen it packed yet, the chances of it surviving seem quite high. It is only about three months old and the café has the backing of a successful restaurant. As we’ve noted before, there is a growing market of Pyongyang citizens who are willing to spend $3.50 for a coffee.

Combined with the river view, this should soon enough become the city’s hotspot for tourists and expats who can’t stand another cup of instant coffee.

Air Koryo Anticipating a Big Summer...

There have been rumors of Air Koryo offering more flights than ever before for 2013, but now there is confirmation. Confirmation being a notice on the door at Sunan Airport. As of mid-April, Air Koryo will be running flights to Beijing on Monday and Friday as well as its regular Tuesday/Thursday/Saturday flights. This will bring them into direct competition with the Air China flights on those days, which are more expensive. Moreover, Air China seems to run the route quite reluctantly, especially in the winter, when any dusting of snow seems to be a pretext for cancellation.  Its not hard to see why: during the winter months, capacity is very low.

Anyway, the Air Koryo flight schedule is below:

flight schedule