ILC2021-7 Session 5 "The Potential of Private Sector Initiatives to Boost the North Korean Economy"

ILC2021-7 Session 5

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[Music] [Music] [Music] [Music] [Music] [Music] so [Music] [Music] so [Music] [Music] hello and welcome to our respected panelists and participants my name is ula tulesen i'm the iaed vice coordinator for europe and the middle east it is a pleasure to welcome you to this webinar on the theme the potential of private sector initiatives to boost the north korean economy throughout this year upf europe and middle east has been holding a series of international leadership conferences on the theme toward peaceful reunification of the korean peninsula so this webinar is part of three imc's being held in june july and august 2021 this july conference focuses on track 2 diplomacy and the role of non-state actors toward peace on the peninsula as you may know upf is an ngo with general consultative status at economic and social council of the united nations upf's main goal is to promote the development of the world toward permanent peace and cooperation based on the vision that humankind is one global family and to achieve this goal ups has created several associations that work in various fields the present webinar is organized by the international association for peace and economic development iaed which as its name indicates aims to contribute to universal peace through harmonious economic development before we begin i would like to refer to some technical details we have translation into russian the chat icon is for remarks and information and the bias of the panelists will be also available there on the chat for questions please use the q and a icon then your questions will be answered by our staff and questions to the panelists will be dealt with during our q and a session now let me introduce the moderator of this webinar in doctor claude begley we have a very experienced and knowledgeable man dr begley is a swiss entrepreneur founder and president of the investment company symbian swiss he is a former member of the swiss parliament and has a phd in economics a master's in law and also in international relations he has held leading positions in prestigious organizations and companies in numerous countries and has been involved with a wide spectrum of business sectors now it is my pleasure to hand over to dr begler please thank you thank you very much so this fascinating conversation which we are going to have today will be with three brilliant speakers there will be mr paul chia they will be mr mark toccola and mr pablo sans we will try to debate about how the north korea economy can open what are the preconditions what are the ways possibly the hindrance factor and what can facilitate not an instant transition because this is mission impossible but something which is relatively smooth and obviously if from economical point of view we manage to have a peaceful transition that will have a direct impact on the geopolitical and military side of it so to start with mr paul chia has been a very active dutch invested in i.t sector for more than 25 years beside a study in information technology studied cultural anthropology in amsterdam and i think to work on i.t and on anthropology you really have the world in your arms because you have the two sides of it he graduated on research on the indian software industry and as you can imagine i am accompanying you today as you can see i'm in mumbai just in the middle of the munsoon in india in 1995 paul founded gpi consultancy a consultancy firm in the field of international outsourcing paul has contact with companies in many parts of the world his business contacts with north korea started in 1997 and his first visit took place in 2006. he's a very deep he has a very deep understanding he has a very much inside knowledge of what happens in north korea and it will be quite interesting to hear from this he now organized business missions to this country on a regular basis including i think media business mission and he organized those tools the last visit was in 2019. so please mr tj the word is yours and we would like to try to learn from you what is on the hidden fire hidden face of the moon what is um what so many people do not know what is the reality of north korea please the floor is yours yeah thank you for your introduction dr bakelin i'm based in the netherlands and it seems that we are also in the monsoon season because it is raining all the time in this summer first of all i will show you some pictures i have made during like my last visit to north korea which was in 2019 what you will see here is a picture from the uh pyongyang international trade fair which takes place every year actually it takes place every spring and every autumn in pyongyang and it is the largest trade fair in the city and what we see here is a large number of booths from both international companies and north korean companies and this trade fair is expounding every year it started in just one hole and last last time it was already spread out to two big holes and also a lot of booth on the outside of the holes it gives you an indication on the development of international trade i must say most of the foreign companies they are from china but there are also some companies from other asian countries and even from europe it is heavily crowded and you can also buy some articles i just want to show it as an indication of existing international trade with north korea the country wants foreign investments it is interested in foreign trade and actually over the last years international business with north korea is growing unfortunately for the country there are the united nations security council sanctions officially to hamper the growth and the use of nuclear technology and nuclear weapons and these sanctions also have a negative effect on let's say a legitimate business for example it is not possible to produce garments anymore in north korea and i always brought a number of european garment producers to the country which is not allowed anymore but nevertheless despite the sanctions foreign trade has been growing and unfortunately because of the covet 19 situation north korea closed its border since early 2020 that means that international trade in physical goods is almost impossible at the moment however despite the closure of the borders it is still possible to conduct online i.t

related work on behalf of foreign clients and to be done in north korea this is a type of business which is not very well known and that's why i selected this topic for my and examples of this online work can be found in administrative work software development production of computer games and animation i will give some examples later and there are some advantages of online work both for north korea and also for the foreign client for north korea it means that it creates new and also highly skilled jobs office work so it is quite pleasurable to do this type of work and it can also be started quickly you do not need large investments to start online work for north korea it also gives the option for knowledge transfer they can learn about the business processes and the way of working we are used to in the western countries which is quite interesting for them of course and it gives them the option for deep personal contacts with foreign clients maybe online and hopefully in the future also with personal visits to each other's country and for the foreign client it gives access to uh talent i.t talent which is really scarce actually there's a shortage of i.t skills in europe doing i.t related work is quite expensive in europe and working with north queens it gives you the option for cost reduction and it might give you access to new export markets it could be north korea but it could also be other asian countries for example if you want to translate your software into japanese or in korean or in chinese you can do this in north korea and it can give you options to sell your products in other asian countries as well and of course the basic for this type of outsourcing is the fact that there is a high level of ict education in north korea the government has been investing a lot of money in uh education they have always done this and also in ict this is the one of the ict internet rooms in kim il-sung university in pyongyang what we also have in north korea is a number of large companies and of course smaller companies meaning that the ict infrastructure let's say the combination of trained staff available office space and all the i.t infrastructure is available this is an example of a large it company they do have their own campus in pyongyang different buildings with offices they even and they even have their own hotel because of a number of international guests and clients and what you see is offices with in this case a lot of computers it's like an indian software company i would say not much different apart from the large companies the one i just showed you has more than 1 000 employees but there are also smaller companies of course this is a smaller one maybe one or two dozen of it staff working for foreign clients by the way and what can be done in north korea different types of work it started with simple administrative work like data entry this is a girl she has been typing data from a telephone directory into the computer to be used by a european client it's very simple work and more popular is making software north korea has already a lot of skills they do develop their own software products for example in the field of face recognition fingerprint software anti-virus software sometimes based on artificial intelligence high-end software and the european client can just search for a suitable north korean partner to do the work which is required for example the production of websites these are some examples of north korean websites you can think about mobile apps this is an example of a north korean telephone a mobile phone with north korean apps but they are quite capable of making apps for european clients as well uh apart from let's say administrative software you can also think about technical software which is inside the smartphone for example in the past south korean software producer samsung they collaborated with a north korean software company to make what's called embedded software technical software inside the heart of the telephone as an example of a potential form of collaboration on the right side you can see some medical equipment made in north korea and also the software the technical software has been made by a north korean software company producing computer games is an option this picture shows uh some games made in north korea in the field of go the asian chess and it is quite difficult it is more difficult to make computer versions of go than computer version of the european chess but this north korean company made such a high level high quality game of go that they even won some international gaming contests in the field of goal north korea is already well known and quite successful in the field of animation for example in the field of animations for children there is this company i think they also employ around 1 000 employees only making animation a lot of animation is made for chinese companies but also south korean companies have been using the services of this north korean company and even in the past walt disney did outsource some of its cartoon work to north korea another example of let's say gaming is this origami software origami the asian art of paper folding which is not easy to do it by hand and it's extremely difficult to make computer versions let's say simulation software of origami and this is a north korean startup company they have invented an in a new form of simulation software and actually this is startup they are looking for foreign investors to build this example into an let's say a real life extend extensive version of the software and they need not only investors but also european partners to do the marketing of the software and to find partners because it can be used in several fields for example in training for mathematics for children and in other fields this is an example of where private companies can nicely work together between europe and north korea and what is also important i would say because we are dealing with countries in different political systems and unfortunately with the kind of cold war situation i would say the more human interaction the better it is and trait and business gives you the option for human interaction that is not always the case if you want to produce garments in north korea for example there is not a lot of human interaction or if you are selling televisions like philips has been doing there is not a lot of interaction possible however if you are doing it-related work like software development it is rather complicated and you need a lot of communication to do this successfully and that means that often it is better to have personal interaction to have personal meetings for example going to pyongyang to meet the counterparts in often an informal setting this improves the quality of communication and it also creates trust and trust is something which is missing between north korea and the outside world so business can be yeah helpful in creating this trust and another example is it is possible to visit the north koreans but it is also possible and appreciated if you invite the north koreans for a visit to you in europe it could be in the field of technology business or in the field of academics and also in the field of peace for example this is a delegation of the north korean knpc the korean national peace committee and they were invited by several dutch organizations to visit the netherlands and they did meet several dutch peace related organizations they also met some representatives of companies they were able to visit other european countries as well and those are some examples of useful visits which create also trust and it will deepen the communication and i think this is very important and private businesses can play a very positive role in this field so thank you for giving me the time for this short presentation thank you thank you very much paul i'd like to have a quick question to you i i was also in north korea i agree with you that quite a number of north koreans have a high level of education i agree as well that the i.t would be

a low end transferee sector that the labor costs in north korea make it competitive even versus china or vietnam so all of that makes sense to enter in software development in game in animation however north korea is also quite well known for cyber attacks so how to ensure that asking north koreans to develop software will never have a troyer horse with the risk of cyber fragility which could be exploited later on i don't know i don't want to be nasty but it's an automatic question which comes when we talk about the sector what are your views cyber security is very important and actually even in holland when i'm reading the press we can see examples of cyber crime appearing every day and every week we can see very large intrusions by criminals into foreign i.t infrastructures so it is very important and it's also an important issue if you decide on outsourcing some of your work to win foreign partnering but to be honest uh this is a question it always comes up if you want to do outsourcing and it is also a question which came up if i was involved in arranging outsourcing to india if you want to arrange outsourcing to russia or to eastern europe or to china every client will be worried about the security issues if you are working with a foreign supplier and so it has nothing to do with north korea it has to do always with the topic of outsourcing you cannot avoid this topic and that means you have to do your research and you have to do uh yes you have to do your research if it is north korea if it is russia china or india but to be honest a north korean i.t company it is trying to find foreign clients to do software development their focus is on doing business with foreign clients they will not be a cyber crime organization because they are in a different field they are different entities so in this case if a north korean company would be involved in cybercrime or an india company would be involved in cybercrime as soon as they will be discovered it will be end of their business and they cannot afford this kind of stupid activities so in my view outsourcing to north korea is the same has the same risk as outsourcing to any other outsourcing destination it is an important topic but but we should not give it a reason not to outsource to north korea there are too many advantages thank you very much thank you we are going to listen to mr marc toccola who has a very impressive cv he's vice president of the korea economic institute of america washington dc so it's one of those think tanks which make the dc so famous they have specialists in everything he retired as a u.s senior foreign service officer with the rank of minister councillor september 2014 his last posting was minister councillor for political affairs at the u.s embassy in london previously

served as the deputy chief of mission the american embassy in seoul in ullan bator and in reiki all places where the languages are not so easy among his other postings were two tours of the us mission to the european union in brussels ministry councillor for academic affairs at the embassy of london economic council at the u.s embassy in the heart he also served as a director that's also very interesting of the iraq transition assistance of this in baghdad 2007 eight mr tokala received the state department's superior honor award for his work of implementing the dayton peace accord while serving his political counselor in sarajevo in all the crisis of the bosnia zergovina in 97 to 99 so very very difficult situation calls a ba in international relations from pomona college clermont california and a law degree in european community law from the university of edinburgh in scotland mr tobola serves on the board of governors of dhaka an organization of foreign affairs professional and on the board of trustees of the bacon house foundation so with all that background i'm sure that you have a very deep knowledge and vision about what happens since you also posted in seoul so we had a little bit the vision of what could be done out of north korean perspective you probably will tell us the the other side of the coin and it will be very interesting to put in parallel those two point of views floor is yours okay well thank you for inviting me to join you although wish you were there in person i'm actually calling in from the american west coast i'm in bellingham washington state right now i'd like to congratulate the organizers of this event for asking some very important questions for north korea the biggest problem is not denuclearization the problem is a terrible condition of north korean economy i'm not going to cite many statistics because i've not found them to be reliable in regard to north korea but the evidence is strong that they are under economic distress observers have said for years that two key indicators of the health of the north korean economy are the price of food an exchange rate for the north korean one both were remarkably stable for a long time for years but over the last few months both begin fluctuating which is a sign to me of economic distress in north korea beyond that kim jong-un has repeatedly told the north korean people in recent months they must be prepared for facing difficult challenges ahead even in regard to having enough food to eat part of the problem has been droughts and floods in recent years and part has been the effect of international sanctions and now north korea's self-imposed pandemic border restrictions have cut off imports even humanitarian assistance however 30 years of economic stagnation have been primarily due to north korea's mismanagement of its economy the little improvements they have seen have come from modest market liberalization north koreans now rely more on the market than they rely on their state salaries or on rations however during the last workers party congress of the eighth party congress last year and recent speeches from kim jong-un have shown the state is beginning to reassert control of the economy return to the centrality of the five-year plans and putting responsibility for economic performance on cabinet ministers they're actually stepping away from the market regrettably north korea's economic theory is now based on self-reliance and emphasis on the metal and chemical industries as a backbone of the economy it's hard to see how any growth or improvement in people's lives will come from that in the short term because of concern over the spread of code 19 the government's imposed stricter border restrictions than any sanctions regime could possibly impose so with that we come to today's topic the potential for private sector investment to boost north korean economy not only can the private sector play a role in north korea i don't think north korean economy can succeed without it the issue for us is trying to figure out what we can do it would help north korea's economy that they might be willing to accept i'm not even sure they know what to ask for we may have to help them negotiate their own for their own interests the north korean economy is so weak we may have to start with some simple barter arrangements to really get the north korean economy on its feet will require fundamental reforms in state budgeting banking systems property legislation commercial law and other areas without those reforms north korea is going to have difficulty attracting investment either from north korean entrepreneurs or from foreign investors they won't have the incentive to risk investment i'm not sure north korea will be willing to accept that kind of help from either the united states or from south korea it may be that other partners such as the u.n agencies uh eastern european countries the eu mongolia or vietnam would be a better place to work with them on economic reforms i will add as a footnote that one of north korea's fundamental problems is how to make best use of their vast mineral resources without being taken advantage of by foreign companies or investors that's one area in particular in which mongolia has deep experience and could be of help to north korea the international banks will have an important role to play sooner or later if north korea is going to attract foreign investment or if it's going to meaningfully engage in international trade it will have to establish credit worthiness that's what the banks can do for them i would hope at some stage in the peace process the world bank and the international monetary fund will be able to engage with north korea as they did with other formerly socialist countries such as vietnam one of the very first steps north korea will need to take is to show its government revenues and expenditures the imf will require that i expect that will be difficult to achieve for a country as secretive as north korea but it will be necessary in a certain north korea's own interest in the long term there will need to be an economic relationship between north and south korea they have things to offer each other south korea can offer know-how financial resources and strong connections to international markets north korea for its part can offer mineral resources a skilled labor force an opportunity for infrastructure construction contracts for north south korean firms and maybe most important overland access for south korea to china russia and beyond one of the challenges will be to ensure that north korea is not overwhelmed and destabilized by south korea's economic strength which is at least 40 times greater than north korea's one particular area that will require attention is to make sure that south korean companies do not absorb north korean assets one way to safeguard that would be to have an inter-korean agreement on competition policy to ensure that south korean companies do not take too much advantage of their dominant position and to ensure that south korean economic activity in north korea will benefit the north korean people let me stop with that because i hope we can save more time for your questions and answers but again thank you for letting me join you thank you very much mark just a quick question again you are mentioning the fact that they are ready to restructure the economy you mentioned that the main skills are minerals and skilled workforce what i had observed in north korea was that they still kept a military sector they skill kept a heavy industry sector both are heavy and practicably very very hard to change but they had introduced a light industry sector which was much less centralized it was at the level of the provinces and not at the level of the central government and there they had left a pretty big freedom to the local authorities to develop their local industry so my question to you one thing is private sector another thing is foreign investment obviously the two things are not the same is there in your view a way because i don't think it's going to be the you know traditional american uh large corporation that's the second step or the third step but do you see a way that there could be some cooperation between that light industry sector which is already relatively decentralized and some people in the west no you're right that's been one of the sources of growth and it hasn't been in development over the past decade or so um yes that's possible but not until there could be some kind of a commercial law enforcement uh it's been very difficult for foreign companies to operate in north korea because they will change the terms of the contracts we saw what happened to oroscan the egyptian company when he tried to uh partner on mobile phones in north korea they signed a contract and then north koreans kicked orosco out of the country or south korea's efforts with the kaesong industrial complex to hire north korean workers where they signed the agreements but the north koreans started renegotiating asking for more money kind of holding investments hostage so there needs to be some reliability some contract enforcement the problem now is north korean regime is so desperate for foreign exchange that it's squeezing the companies that have been successful in trying to operate in international market and small light industries to produce even given more foreign exchange so their ability to grow is shrinking so uh i'm i'm i'm with you i think light industry is the way forward lusty controls the way forward but they're moving the opposite direction right now okay good and it's very interesting because you offer the transition to the third speaker with a commercial law not now but maybe we should reflect on it a bit later on i think there are a lot of countries not necessarily as untransparent as north korea but some african countries uh many developing countries where you may have absurd law but because of the corruption because of a certain type of governments well that fluidity does not exist and basically you replace the law by the relationship and maybe in a country like north korea if you are close to the decision maker and if you have a good understanding with the decision maker it's more important than the law itself as you know there are countries china would be one of them when you sign a contract it doesn't mean you finish the deal it means you start negotiating so that relationship factor we leave it so thank you because you mentioned the law and our third speaker today is precisely a specialist in the field so pablo sans is an assistant professor with phd in commerce law at icard law expert in digital business regulation and corporate law international experiences in teaching in various european south american and asian universities now he also has quite a bit of understanding of the korean context it was a speaker 2017 legal scholar roundtable in seoul organized by the korea legislation research institute in 2018 at the trade law forum organized by the regional center for asia and the pacific uncitral and the korean ministry of justice where he talks about technology law and digital market recently he participated speaker to the 2021 korea law forum organized by klri where he spoke on research and policy technology law and digital business korean and european approach so it's very interesting because you are going to help us first speaker spoke very much about the digital economy in north korea second told us that commercial law is absolutely key if we want to develop companies so tell us how we are going to make it what can be done what's difficult to do thank you very much good afternoon first of all i would like to thank the organizers for the invitation it is an honor for me to participate in this forum with this interesting topic in the 10 minutes that i have i propose to briefly answer the questions of our roundtable about what would be the factors to promote economic development in north korea through its private sector and what government policies will be necessary for this purpose i am going to analyze what is the current situation of north korean commercial regulations to attract and channel foreign investments second i will take vietnam as an element of comparison vietnam is a formal socialist republic that has some historical parallels with north korea unlike north korea vietnam has managed to implement economic opening measures that have led to great economy growth in recent decades the purpose of this comparison is to draw some conclusions the idea of doing business in north korea might be relatively new to western firms but in fact there are several existing cases of foreign businesses mostly chinese and russian firms doing just that each firm must have a different plan and goal for doing business in north korea but they share one thing business are done in the form of a joint venture with the north korean government although there are some exceptions in fact there were more than 215 joint ventures between china and north korea and about 30 joint firms between russia and the north up and running as of the end of september 2017. in many count in many communist nations it is common is a common tactic to require foreign firms to share control of their local business with the host country as a condition for market access north korea is not an exception in this regard in this sense north korean kim il sung university published in 2018 a series of guidelines for foreign companies that are interested in doing business in north korea it gives a clearer idea of this of their requirements according to the university guidelines there are three options for foreign companies looking to enter north korea first there are two types of joint ventures in north korea one it's a set up where a foreign firm and the north korean government equally invest and have business control over a joint venture company the two parties also equally share the profits in another type of joint venture a foreign company and the north korean government jointly invests but the latter has control over the business although the north korean government controls the business the partner firm can participate in a joint management commit in this case profits or losses are shared by both parties according to kim il-sung university the third business option is called a foreign company this option allows foreign companies to own one hundred percent of the their business entity in north korea with this option the foreign firm has full control of the business and the north korean government has no rights to implement to influence the management such companies are only allowed to be set up within a special economic zones across the country kim il-sung university has stressed that business opportunities are open to anyone including corporations individuals and ethnic koreans living outside the north in order to expand exchange and cooperations with other countries however there is a reason to be skeptical north korea does not yet have a proper environment for foreign companies to invest in for instance north korea lacks laws systems and rules for dispute settlement insurance wages and remittances in addition infrastructure from roads railroads and telecommunications to the supplier electricity gas and water is extremely poor and there are not commercial banks or insurance companies because all financial and insurance systems are controlled by the state industrial capital stock is nearly beyond repair as a result of decades of mismanagement under investments short gauge and spare parts and poor maintenance resource mislocked misallocation large-scale military spending and nuclear programs separately draw off resources needed for investments and civilian consumption in addition industrial and power outputs have stagnate for years at a fraction of pre-1990s levels so why doesn't north korea become more like vietnam vietnam and north korea were once considered two of a kind divided countries sharing a border with china and determined to unify their countries under the chosen ideology of communists after the cold war the two took very different paths in many ways modern north korea is equivalent to vietnam in the 80s for one the communist party of vietnam has ruled the state even since its independence in 1945 just as the workers party of korea has always governed north korea in the late 1980s vietnam embraced free market reforms that eventually opened the country out vietnam tried the dogma of the centralized central ban economy for a long time and was almost reaching the point of collapse then some managers of a state-owned enterprise in south vietnam flew the communist regulations by paying the workers according to their production instead of a fixed salary the saigon communist leaders visited the factory and had sufficient intelligence or pragmatism to see that was a good thing rather than disobedience that needed to be punished they started to allow other state-owned enterprises to do the same the hanoi communist leaders went south to investigate why the southern enterprises did so well compared to the north node once they collectively came to appreciate some benefits of capitalism but only after an intense internal ideological struggle now vietnam frontier market is one of the worst fastest growing economies thanks to an expanding middle class a strong manufacturing sector and young population vietnam began receiving assistance from the international monetary fund and the world bank in the 1990s after it began enacting reforms that was followed by significant foreign investments in the investments and membership to the world trade organization in 2007. vietnam has also maintained your political flexibility and relationship building for example hanoi enjoys close ties with washington despite stark ideological differences and decades of hostility during the vietnam war hanoi has also managed to cultivate ties with many countries including russia japan and india as a result of this improvement in access and trade relations vietnam has been one of the fastest growing countries of the past 20 years on the other side north korea remains closed for business so they remain among the world's poorest hanoi government is working hard to develop economic prosperity vietnamese politicians know that vietnam cannot achieve real growth for the country if they don't reintegrate vietnam in the globe into the global economy conversely north korea is a prime example of how less prosperous our countries can be by reminding unwilling to fully embrace all the things the world has to offer to improve the people in just about in just about every facet of life now the gdp of vietnam increased by amazing seven percent last year vietnamese gdp is the 47th in the world north korean is the 113th in fact it is estimated that vietnam might become one of the biggest economies possibly 20 20 25 biggest economies by gdp by 2050. north korea is a start in a stark contrast remains so tightly controlled that private markets have to flourish illegally or see me legally for the sake of survival while legitimate large-scale private enterprises is largely unknown to conclude vietnam may not be a free country politically but the vietnamese enjoy a degree of real economy freedom that north korea can only dream when vietnam government decide to open the market and introduce capitalists to improve economy most vietnamese people happily follow the government policy if north korea tries the same most korean will find how much they have been cheated by their government and want to be united by south korea that happened in germany any north korean attempt at liberalization will depend on the progress of ongoing nuclear negotiations the lifting of sanctions people by economic reforms and changes in national security policy and international relations will help put the north korean economy on a path of stable growth and economic integration thank you so much for your attention thank you very much pablo i like very much your comparison of north korea and vietnam and i personally agree totally with everything you said about vietnam now that being said i think there is a clear distinction to be made between ideological consideration and business consideration we all know that some of the best business managers in china come from the school of the communist party so chinese is typically an example which is pretty much business driven although it's highly communist i think when you make a comparison between north vietnam north korea china and vietnam you see that in the three countries the communist party rules and want to continue ruling and wants to keep the power so that's the not negotiable factor the communist party must keep the power that's the ideology but the difference between the three or one of the major difference between the three uh coming back to the question of digitalization and communication in north korea you hardly have internet and of course no social network in china you have internet at every corner but things like google would be replaced by chinese version of the net and in vietnam you have the internet everywhere and a full access to the social network and i understand that an average vietnamese below 30 is spending up to four hours per day on the social network and i also understand that the communist party is a little bit using the facebook and those kind of things as a parallel parliament because they are listening they are looking at the audience they are digitally not only controlling but also checking how the mood is evolving and they are somehow adapting the decision based on what they hear on the net so i would like to have your views on that point because i you made a very interesting comparison so how do you see that that digital liberalization from close to zero in north korea to close to 100 percent in vietnam within the three cases a very strong communist party a central central committee of the party how do you see that as a differentiating factor and how do you see that it could be part of the evolution and the solution thank you very much dr begley well i think that i am since the late 80s and the vietnamese politicians were were pragmatic compared to the north korean politicians and they focus on economic growth more than in ideological or political issues so the vietnamese communism is uh is not a real doctrinary communism i mean ho chi minh was more a nationalist man he was more a nationalist leader against china so when the soviet union fell down and the vietnamese the communist party of vietnam uh tried to open its economy because uh they lost uh its main ali which was moscow so this is the main contrast with north korea in my opinion so in the other in the other you know on the other side i think that before ideological uh putting aside or putting aside the ideological things i think that as mr tia said before personal interaction is the key to do business i mean trust is the foundation of economics so for this reason north korea should be more trustful i mean they need more transparency they they need more openness in order to attract foreign investments so they have to create new kind of trust trust because if not vietnamese were able to create um a trustful atmosphere so this is the key question um vietnam was able to do that in the late 80s now it takes long at least 10 20 years to create a good boost of private sector and north korea has to do the same if they want to to make a developed economy thank you now we would like to leave the three of you interacting and asking each other questions and debating asking answering sharing opinions so the flaw is to all of you well let me make an observation about vietnam and see if dr sands agrees i spoke to vietnamese official and i asked the question how did you succeed and he said we succeeded because we have south vietnamese who know how to do international business and and engage in the international world so they were relying on their south korean that south south of india's friends to help them one once vietnam was united north korea does not have south koreans in north korea when they were part of the socialist bloc world they had experience with other countries educated in eastern european universities some exposure to the world they've not had that for 30 years and i'm not sure if the north koreans have the ability to know what to do to reform their economy like they used to have so um so dr sands do you think part of vietnam's success story was that south vietnamese were able to join the government and point the way well i think that um the vietnamese phenomenon is a kind of example is an example for north korea is is a kind of paradigm of how a communist country can transform itself by uh but conserving its own communist regime in terms of political system so i think that north korea has a good example of what to do but as i told you before i think that it requires a lot of time because trust is not automatic i mean trust to build trust in in the in the business world takes very long so if they start now if north korea start now creating good atmosphere for business for example open participating in doing business of world bank ranking providing information for investment investors international investors to to open its economy to transform the joint venture regime taxation and reducing its corruption or for example the contract enforcement the translations of regulations many many other there are many things to do in north korea if they want to to transform its economy um in in the long term to get united to the south that is the the goal that the purpose of everything in my opinion on my side how did you see this question of the trust you remember for example the former communist bloc when it came to credit rating they were very high you knew that you would always be paid so that's one element of trust on the other side the question was asked in the second presentation well are they going to disclose their source of revenue and the answer is of course not because currently due to the sanction part of the revenues are clearly illegal revenues part of the petrol which is there are so many cars in north korea and there is in principle no petrol so it's all coming from china and we without being nasty but we know that there is uh there is uh weapon trade there is a little bit of cyber attacks as we said there are i think the north koreans have become because they are very good technicians i think they are the best producers of false dollars to be circulated in the world so they will never they cannot say oh yes we do that so so on one side some elements the feeling i had is with with the north koreans i met i really have a feeling that i can trust them you know if they want i did not do any investment in north korea but if i did an investment i'm pretty sure they would stick to the world more than some other countries which are not communist countries you know some of those banana republics where you never know i mean india now you have rule of law but the law is interpreted in different ways depending on the various interests so i think if a north korea which would be government tells me we have a deal i think i can trust them on the other side if the question was how do they finance their budget well we will it's guaranteed we would never have an answer so how do you see that trust factor how how who should answer you whoever wants whoever dares an idiot we are talking about two different situations i mean we are talking from a private business point of view i think in many situations private businesses can do business with other countries companies in other countries even though the law situation is very different they're different but i think one of the main issues is the cold war situation and that's i think i would like to ask pablo in vietnam there is no cold war situation anymore between vietnam and the united states the united states they have accepted their defeat they lost the vietnam war and they are willing to work with vietnam on a normal basis however that's not the case with north korea there is still an extreme cold and sometimes hot war situation between the united states and north korea and the united states is not willing to change this fundamentally their focus on nuclear disarmament is a little bit misleading because they are not willing to engage with north korea on an non-cold war situation and in such a case we cannot compare north korea with vietnam i think these are totally uh different situations yes i agree mr tiga i think that there are some similarities but of course there are many difference in terms of international relations diplomatic issues uh border controversial so of course there are many difference between vietnam and north and south korea but i think that in terms of economic development i think that vietnam demonstrates to the world that it's capable to maintain a communist party regime it is formerly a socialist republic it has only just a unique party system but in terms of economic system i think that is a good example for north korea i think it's a good example to boost the private sector initiatives in in in starting by open the economy to to the population of and society of of of north korea in this sense i think that there are some similarities and vietnam can be a very good example for north korea i i think so and i also noticed that there were some north korean delegations already visiting vietnam but still if i talk from an european perspective if i want to pay my north korean partners i cannot use the banking system a very simple thing if you want to do business you want to pay your bills it is not possible to pay the north koreans or the north koreans cannot pay me because the americans do not allow foreigners or europeans to use the international banking system so this hill this whole cold war situation especially because of the united states is hampering all normal business so even if north korea is opening up it is still giving a lot of problems if i may i know we're here to talk more about commercial and and economic activity and politics but it has been raised so let me just say that by administration uh through its special representative sung kim has offered to meet with north koreans unconditionally anywhere anytime to be open negotiations they've refused to do that i don't think it's because north koreans are anti-diplomacy at this point i think it's because they're so um considered their internal crisis with the covid restrictions that they don't have the bandwidth to engage in diplomacy right now but i think that the us government is waiting for north korea to respond to its invitation to talk and i think that the us does want a peaceful settlement i don't think the us wants to have a state of armistice continue forever uh for north korea's part they seem to rely on outside pressure as an excuse for their internal repression and economic control i think it'll be difficult for north korean regime to find a way to open up until it can have a reason for being other than the foreign threat which is what the they're always telling the north korean people they're facing uh in an investment i i think that there are north korean entrepreneurs who want foreign partners but i'm not sure the north korean government understands that a european diplomat i know met with the minister for trade or whatever the equivalent is and ask the question to him what are you doing to attract foreign investment and the north korean minister said we published a book foreigners can read it and comply so in other words not much i'm not sure the government cares that much about it well actually i will on our last visit we visited uh the coastal city of wonsang in the eastern part and north korea has been building a huge tourism facility on the coast it it has a large number of hotels and other facilities so they invested a lot of money in this new tourist venue it is possible for south koreans as they did in the past to visit north korean tourism facilities south korea is not helpful in any way to facilitate this they are afraid of violating international sanctions and this is an example i think for the north koreans how difficult it is to attract foreigners foreign tourists even though the facilities are almost ready and there i would like to just come on this point i visited the same center it's quite impressive it's about six kilometers long with a one four five star hotel after the other in construction and a huge international airport so uh of course there would be a contradiction between saying the country is completely close and they build a big international airport for that it could be like in cuba where you have places or in the past where you had really tourists arriving at a certain spot not entering in the rest of the islands etc but i i personally have also the feeling that they are willing to open up the problem what i wanted to say just before as long as we have a global problem as long as we have the sanctions not only the u.s

by the way as long as we consider they are outcasts uh it will be difficult to find a really good solution so it's step and step they have to make a few steps forward and the west has also to help and probably it's by the investment in the private sector small things but small things which will little by little grow and and show to the others that it's possible that it will be so i don't expect uh an instant global solution i personally would think it's the strategy of one part after the other slowly slowly slowly but making it possible and i think there is a good chance that they would accept those small investments small measures small companies not starting with a very big investment i don't know what are your views well that's what we see in the field of iq outsourcing you always start very small and it's not even related to north korea even if you want to outsource work to india you are starting to work with a new partner a new country a new culture it is not easy so you will always start with a small project so even if it fails then the risks are relatively low and i think this is also the case for north korea you have to start with low risk and smaller projects and if it is successful you can you can make it larger and more more complex but i think for north korea the best way is to start small with less risky projects yes if i can say briefly i think we could go back one step earlier and say the biggest source of capital for north korea is within north korea they need to mobilize north korean capital because so far the north koreans are unwilling to put the money into banks because they're afraid of being confiscated so they hide their money they're i'm going to invest it so if the government could create some certain years and property rights for north koreans to to mobilize their own capital that'd be a huge start well before ford investment could we maybe take some questions from the audience and i'd like here to request the organizers if they want to put forward one or two questions which have been asked by the auditors if one of the organizers could help with uh with some of the questions yes enrique thank you very much dr begley it is being very interesting webinar thank you to everybody really very interesting and going to the central point of our webinar i would like to ask what in your opinion would be the first step to be taking in north korea in order to introduce the private initiative and the private property the question is for everybody maybe for portia that knows better north korea well i think the first step is we must make more it must be made more clear to the european um private sector what actual business opportunities there are in north korea and i must say this is also a responsibility of the north korean government by the way or the north korean companies they are not active that much as in vietnam or china for example in promoting their business opportunities to the outside world but nevertheless there is already sufficient information available and i think it is also up to the private companies who are willing to explore uh north korea including some of the attendees maybe of this webinar uh to to come together and to think what can be done and what could be done by people within this network as a first step just let's say a round table meeting or another webinar about actual business opportunities and then the second one is uh to go together to north korea if that's possible otherwise we do it virtually and to see if already some small real-life projects are possible i think this is uh maybe the best way uh to start in our community i will give my answer when when i went to north korea the mission which i had was to precisely think how they could open up to the western world and how the private sector could enter first of all they are looking at models like vietnam as you said or mongolia which where countries which used to be i would not even say communist stalinistic like them and who open up to a kind of market economy plus kind of for mongolia more or less democratic system not exactly the one you would have in the northern europe for example but still kind of and they are seriously looking at those i had a feeling after all the conversations i had with i've seen a lot of companies and i met also with the government i have a feeling that of course it has to be non-strategic non-military non-heavy industry to start with i got a feeling there was a very high level of interest for anything which is about tourism i had a feeling that there was a very and for example that station which they have in the east is just unbelievable when you see that it's unbelievable what they have done there was a very high interest in the field of agriculture and food processing and there i'm nearly convinced they would be ready to support a company which would come they would be as well support for basic health care and there would be an interest if we bring of industry but not the heavy industry relatively light industry but helping them to go one step further in value added from what they have i just opened apparently i visited the shoe factory but it's really really done still by hand and in plastic and it but in the true factory they had more than 40 different design because they wanted the people don't have like in the traditional communist country one type they wanted that the people have a choice so that's very interesting they are opening up and they were talking with some design companies in milano to open so i think those plus the i.t sector i fully agree those are the sectors where we talk of relatively small investment where we talk of an entrance barrier which is not too big and where it doesn't interfere with the hegemony of the party with the military or the political dominance but i'm pretty sure that if you do that you have you don't have the law the commercial law but they are so eager to demonstrate that it's possible that they would make it possible they will try with or without the law to make you succeed because they want to have a few people who could say i went there i did it and yes it worked so they will replace the law which we have by your willingness to demonstrate that's my belief i may be wrong but that's the perception i have yes i have some three practical ideas for answer the question of mr enrique i think that the first point of the the main reason is political leaders in north korea should be more pragmatic i mean um i think that they should to avoid or forget the political the political and historical backgrounds and controversies i mean we are now in the in the context of the fourth industrial revolution i.t markets ip markets robotics computers so in the future and now in the present we we and the economy will require even more and more cooperation and integration so at in the international level so north korea shouldn't be as close as it's now i think that ish the political leaders in north korea should should be more pragmatic the second reason is that they need to stop wasting huge amount of public budget in weapons in nukes in military forces it's a waste of money and this kind of resources financial resources should be devoted to more interesting things like education agricultural automo and computer and this kind of ip markets i.t markets and the third reason for me is also very important more transparency more and they have to provide information to the world bank for example i as i said before the world bank has a very interesting ranking called doing business ranking north korea doesn't appear in this ranking 190 countries parties take part in this ranking not in north korea i think the first step is to start improving the metrics in the in this ranking by participating providing information to the to the international institutions investors etc this kind of thing will create trust for the foreign investors so this is the three reasons in order to answer the questions of mr enrique yeah i guess what i would add is that um briefly is that um it's important to realize that some things do go on there is some quiet work being in north korea today so it's not as if no one's communicating with them and refusing to talk to them i'm thinking of the united nations economic and social committee for asia-pacific s-cap north korea is a member of the s-cap group of northeast asian countries a north korean government has asked s-cap for help with a commercial law and some bank regulations railway switching and north korea provides data to s-cap on bird migrations or air pollution so there is there's quiet work that's going on and it's probably good that's quiet you know if north korea can engage in some behind-the-scenes discussions with some international organizations that could be trust building too and we might encourage you and agencies to do more if they could yes there is uh there is some uh trade going on also it has been quite successful for example in the field of potatoes uh the the netherlands and also dutch universities they are quite advanced in producing new seeds new varieties of potatoes they have been introduced in north korea including research on potato diseases and i'm sure the north koreans would like to repeat this again but the problem is there is not sufficient foreign currency available in the north uh some time ago we had a north korean delegation visiting the netherlands to look at sustainable energy including wind energy in which netherlands is also quite advanced but it's quite expensive to export those machinery to the north so for this reason i think it is more useful to think about how we can bring money into north korea and that means we have not to we cannot focus on selling things but we have to think about what can we buy from the north is in uh tourism as an example outsourcing is an example so there are options uh what i would also like to mention is academic exchange uh this is something which is i think not very difficult to achieve sending foreign academic delegations to the north or inviting north korean academic delegations to europe this is this can be done relatively easy and which can be appreciated by both sides on the foreign exchange again there is a big difference to be made between the macro economy and the real life in each shot in the macro economy i fully agree there is of course a lack of foreign exchange when you walk in north korea because i had insisted when i went there to have the possibility to work alone from time to time and choose where i was going and when i was asking the people to to open the cash box you have rmb everywhere and actually the imb is both a foreign currency and a domestic currency and it shows you the overlap between the chinese economy which is completely dominant in north korea and their own north korean economy so if you go through big projects we have to talk official foreign currency if we talk to what i said before small things in agriculture in the food processing you have all those things where there are ways it means how the money circulates if i may i realize that the watch is going on and we are all very happy in this conversation this time and i'm very grateful to all of you when it's crisp and short it's better than when it's too lengthy we don't want to have fidel castro type of speeches so could you please each of you try to give out of that conversation i will shut up not to disturb i spoke much could you please give as a conclusion your views on our conversation and i let you choose the order who wants to speak first well i would say uh the most important uh issue is there's a lot of interest i noticed we have a lot of attendees so there's a lot of interest in these topics but it's all about what can private businesses do i mean we cannot change the world we cannot change the cold war situation that much the only thing we can do as individuals or members of organizations is to connect with north koreans to exchange our ideas to see what kind of engagement is possible what kind of business is possible and i think we should focus on those small steps in the future thank you very much well i think that um for me the conclusion is very clear i think that doing business u

2021-07-30 03:24

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