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Last Updated: Tuesday, 13 April, 2004, 08:18 GMT 09:18 UK
Foreign investors brave North Korea
By Lucy Jones
BBC News Online business reporter

Roger Barrett in Pyongyang
Roger Barrett says North Korea is the next Asian tiger
"Got any nuclear weapons for sale?" is the response Briton Roger Barrett usually gets when he tells people at Beijing cocktail parties that he invests in North Korea.

The country's admission to a nuclear weapons programme and its listing on George W Bush's "axis of evil" means most people are staying well away.

But Mr Barrett, 49, a former troop commander in the British army who has 10 years experience of doing business in North Korea, recently opened a branch of his consultancy firm, Korea Business Consultants, in Pyongyang.

A self-confessed "business adventurer", he says there is growing interest in the country after Chairman Kim Jong-il introduced economic reforms in 2002.

It's like China in the eighties... The market reforms are very evident. It's an exciting time to join the market.
Robert Barrett, Korea Business Consultants
He is also the enthusiastic publisher of what must be North Korea's only business publication - the DPRK Business News Bulletin - which features some of the 250 companies he advises.

"It's like China in the eighties... The market reforms are very evident. It's an exciting time to join the market," he says.

Mr Barrett is not alone.

Even in the middle of a nuclear crisis there are foreign investors in the country, and their numbers are increasing.

They say North Korea is a mineral rich country that needs everything and insist they have to get there first.

They also believe the 2002 economic reform is for real and that the country is gradually moving towards becoming a market economy.

Poverty

The little data there is on the country's economy is hardly encouraging, though.

There has been a devastating famine and the UN says malnutrition is still widespread.

N KOREA'S ECONOMIC REFORM
Subsidies to state-owned firms have been withdrawn
Workers are paid according to how much they produce
Farmers' markets are now legal
State enterprises are allowed to sell manufactured products in markets
There is greater autonomy for North Korean companies
There are chronic heating and water shortages, and most North Koreans are paid less than 5 a month.

The country also has an appalling human rights record.

A BBC documentary on the country's gulags this year contained allegations that chemical experiments are being carried out on political prisoners.

Meanwhile, the US says it is "highly likely" that North Korea is involved in state-sponsored trafficking of heroin.

In the political arena, the second round of six-nation talks aimed at resolving the nuclear crisis ended in Beijing in February without agreement, which means US and Japanese sanctions will remain in place.

'Communism' tourism

But the foreign entrepreneurs in North Korea are not put off.

Plantation operated by Maxgro in North Korea
A Singapore firm plans to open hotels on North Korean plantations
Some are helped by UN employees who have worked in Pyongyang (among the few people to have had contact with the regime there) and many have a track record in China.

Pack a torch, conduct business meetings on the street to avoid big brother listening in and have plenty of "Asian patience" for the endless red-tape, they advise.

An Austrian company is reportedly buying pianos from the North Koreans, a French television station uses North Korean artists to produce cartoons, while a Singapore-based firm is developing forestry and tourism.

FIRMS INTERESTED IN N. KOREA
Fila sponsors sports events
Heineken is reportedly thinking about opening a brewery
Shell and BP visited in 2001
DHL has operated in Pyongyang since 1997
Berlin-based KCC is putting North Korea online
British-run consultants KBC has opened a branch in Pyongyang
The Singaporeans intend to offer "adventure" stays on their North Korean forestry plantations.

Meanwhile, Western tourist agencies are gearing up to offer the last chance to see communism in action, and Fila and Heineken have reportedly entered into sponsorship deals with the North Korean regime.

North Korean labour

A German, Jan Holtermann owner of the computer firm KCC Europe, is putting North Korea online.

He hopes that by being there first he will be able to eventually tap into North Korean computer talent.

The country's small number of internet users currently dial-up to Chinese providers, a costly process at about 1 a minute.

Advertising in North Korea (credit Roger Barrett)
There is now advertising in North Korea
Mr Holtermann's customers, who he hopes will number 2,000 by the end of the year, will have unlimited access for 400 a month.

As only a few North Koreans are permitted to have telephones, and as the internet service is costly, Mr Holtermann expects his customers to be government ministries, news agencies and aid organisations.

He has invested 530,000 in the venture, intending to get first pick when North Korean software programmers come onto the market.

"They are very talented," he says.

"It's this capacity we want to sell in Europe."

The parcel delivery company DHL has operated in Pyongyang since 1997, when it was invited there by the government, and now has North Korean light manufacturing, textile and beverage companies on its books.

It sees itself as contributing to the country's "slow but increasingly visible" economic reform programme.

British consultants

Former bank employee Mr Barrett is convinced North Korea is opening up much quicker than people think.

North Korean mine
Foreigners are involved in gold mining
There are opportunities in banking, minerals, agriculture and telecommunications, he insists.

"There is the odd story of something going wrong," he says.

"But when you walk around you notice construction going on.

"The people are feeling a change."

High level contacts

But how to do business with one of the most isolationist regimes on earth?

It is very important to get the favour of the dear leader (Kim Jong-il). Because when he says something, it gets done
Gerald Khor, Maxgro Holdings
Contacts are essential, say businessmen.

Though even knowing a North Korean minister is not enough, says Gerald Khor of Singapore-based forestry company Maxgro Holdings.

"You have to go above the ministers to the cabinet. You don't have to know a member but you need to know people who can influence them," he says.

"It is very important to get the favour of the dear leader (Kim Jong-il). Because when he says something, it gets done."

Through a former UN employee, Maxgro got Kim Jong-il's attention and has invested $2m in forestry, agreeing the state gets 30% of the profits.

"Kim Jong-il is an environmentalist," Mr Khor says.

"We are confident we'll get a return.

"We have dwindling supplies and this is high quality wood."

To locate the forests elsewhere would cost much more, he adds.

Forced to change

Economic reforms introduced by the government in 2002 are seen as the first move away from central planning since the country adopted communism in 1945.

The government has been forced to change in order to survive, especially now it can no longer barter with Eastern Europe and the former Soviet Union, experts say.

"There is no real option not to carry out these reforms," says UK-based Keith Bennett, who has taken trade missions to Pyongyang.

"But people don't know where they will lead.

"Chinese leaders have impressed on Kim Jong-il that there can be economic reform without fundamental political change."

Way up on North Korea's border with Russia and China is the Tumen economic zone, which was established in 1991 with UN help to lure investors.

The project has only had limited success and may indicate the type of problems those investing elsewhere in North Korea may face.

The North Korean section of the zone, Rajin-Songbong, hosts foreign-run hotels, telecommunications and restaurants, but that is about all.

"The North Koreans have sometimes been very co-operative and sometimes not, maybe because of policy change," says Tsogtsaikhan Gombo, from the UN's development agency.

"They were also disappointed when they didn't see the investment."

Vibrant Chinese economic zones nearby have put up fierce competition.

But even opening the door just slightly to let in capitalism has greatly improved the lives of the 150,000 people living in the zone, says Mr Gombo.

And many foreigners insist that small investments elsewhere in the country may have similar results.


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