Foreign Companies Gambling on North Korea : Trade: GM, Royal Dutch Shell and others are making contacts now in the hopes that the country will be opened to international commerce.
Some of the world’s biggest companies are peeking behind the industrialized world’s last Iron Curtain, lining up contacts that might pay off if North Korea is opened for foreign trade and investment.
Royal Dutch Shell, General Motors and others have made sometimes quiet visits in the past month to the most isolated of the world’s industrialized nations.
For North Korea, the world’s corporate leaders could help build an economy that has been left in a shambles by the loss of aid and trading partners with the fall of communism.
And with factory workers getting about $70 per month, the reclusive Communist nation could be a profitable place for Western companies to make auto parts or refine Far Eastern oil.
Despite the death a year ago of the country’s longtime leader Kim Il Sung, North Korea’s desire to attract foreign investment while adhering to his credo of self-reliance has not waned.
But Western firms, by making quiet incursions now, hope to be able to point to a long history with North Korean leaders if and when the country opens up to trade and investment.
“Hopefully, they’ll remember the ones who came in and were pioneers,” said Charles Randolph, who has made two trips to Pyongyang as GM’s point man in North Korea. “When they do go forward, maybe they’ll think about GM in their automotive business.”
GM sees North Korea as a possible location for a new auto-parts plant that would supply South Korean factories. For Royal Dutch Shell, North Korea will need more oil refineries if foreign investment brings growth.
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After 46 years of Kim’s dictatorial rule and isolated self-reliance, North Korea isn’t ready to allow Coca-Cola billboards and McDonald’s outlets in downtown Pyongyang.
When they go to North Korea, Western companies are usually shown a foreign trade zone in the remote northeastern corner of the country. The Rajin-Sonbong area, hours from Pyongyang, represents North Korea’s willingness to admit Western influences--within limits.
Without aid from other Communist countries, North Korea’s economy has been shrinking. With nowhere else to turn, Kim before his death had begun seeking foreign development and trade.
As part of an agreement to convert North Korea’s nuclear program to peaceful energy production, U.S. economic sanctions in place for four decades were eased in January to allow trade in telecommunications, some financial services and magnesia, a raw material used by the steel industry.
After the sanctions were eased, AT&T; quickly set up long-distance service between the United States and North Korea, and an American minerals firm negotiated the first U.S. purchase of North Korean magnesia in 42 years.
“There’s sort of a feeling that it’s a place we ought not get behind on,” said Donald Gregg, chairman of the New York-based Korea Society and ambassador to South Korea in the Bush Administration.
But as a place to do business, North Korea’s reputation isn’t good. Debts to European countries that financed North Korean imports in the 1970s haven’t been repaid, its infrastructure is sub-par and the mystery surrounding its leadership doesn’t inspire confidence.
“They’re very tough negotiators,” said Jim Young, former military attache to the U.S. Embassy in Seoul who negotiated the magnesia purchase for Minerals Technologies Inc. of New York. “They’ll agree one day and disagree the next. . . . They’re a piece of work.”
Those who have visited the country say North Korea’s muddy roads and limited food distribution will need about as much work as its foreign relations before there’s any influx of Western capital.
“They’ve got a long way to go,” GM’s Randolph said. “All it takes is some time and money. It’ll happen.”
Jonathan Pollack, an East Asia specialist with RAND Corp., the think tank in Santa Monica, doubts that U.S. companies are anywhere close to establishing an on-the-ground presence in North Korea.
Politically, they’ll have to get in line behind the South Koreans, Pollack said. It would be risky for U.S.-South Korean ties if American companies got ahead of South Korea, he said. “If American companies want to go on exploratory visits, it’s their money,” Pollack said. “The prevailing logic, right or wrong, is that this is a country that will be out of business in 15 years.”
