North Korea is attracting a lot of attention these days. What about the investment side of things? Can you in invest in North Korea? And if you could how would you do it? I started with an overview of the North Korean economy followed with the different ways you can invest in the country. Before we go any further, the content of this article is not to be considered for investment recommendation and not is linked to my work or Leopard Capital. I’m doing this for purely educational purposes.
1st Part: North Korea Vice Documentaries
2nd Part: North Korean Propaganda (Pictures & Videos)
3rd Part: North Korea – Funny Pictures, Memes and Celebrity Stop
4th Part: North Korea – Beautiful Pictures
5th Part: North Korea – How to invest in North Korea
North Korea’s Economy
North Korea is a very rigid central planned economy. Along with Cuba (slightly changing lately), they are the only two countries in the world with an almost entirely government planned, stated owned economy. The collapse of the Soviet Union and communist governments around the world, North Korea main source of support, throw North Korea on a steep decline. It’s hard to believe that North Korea had a higher GDP per capita than South Korea until the mid-70s. South Korea heavily invested in chaebol (business conglomerates) as their main source of economic growth and the rest is history. Today South Korea is a world leader in technology (LG, Samsung) and manufacturing (Hyundai) while North Korea’s industrial capital stock is beyond repair because of the lack of capital spending and maintenance. North Korea’s population is also extremely poor with reports of mass starvation. Two different kinds of choices, two different kind of path, two different kinds of results.
Economic collaboration with the South is most noticeable with the Kaesong Industrial Region, a special region 10 km north of the demilitarized zone. It allowed over a 100 South Korean companies to have access to cheap labor and provided the North Korea government with foreign currency. The zone opened in 2004 and an economist from the Bank of Korea predicted that it could create over 725,000 jobs and generate over $500 million in annual wages for the North Korea economy. After a few disagreements, wages have increase over time from $75 a month to $160 a month (North Korea demanded $300/month). At the moment of this writing the zone recently shut down because of the increase tension between the two countries. There is also the Rason Special Economic Zone, located in the North-East of the country on the border of Russia and China, whose purpose is to promote economic growth through foreign investment. Currently Chinese and Russian companies have invested in the zone and in August 2012 an international trade fair was held, offering foreign investors and journalists a look at the work-in-progress.
What are North Korea’s main sources of income?
According to the CIA factbook, it relies on military products, machine building, electrical power, chemicals, mining, metallurgy, textiles, food processing and tourism. Its main exports are minerals, metallurgical products, manufactures including armaments, textiles and agricultural and fishery products and its main imports petroleum, coking coal, machinery and equipment, textiles and grain. South Korea’s investments and trade with China amounts for the bulk of the foreign currency income. South Korea is also the main trading partner. Again, according to the CIA and various sources a large chuck of their income is from black market activities.
Investing in North Korea
North Korea has no stock exchange where you can buy and sell companies online. Don’t even bother to look for an ETF or for ADR listed companies. Therefore you will need to look for alternative strategies.
It’s possible. Canadian and U.S. companies are not allowed but there are some European and Chinese companies that does it. France’s Lafarge owns 30% of a cement plant that employs 3000 workers. I have included the Compilation of Laws Foreign Investment North Korea
Coins and Stamps
These asset classes being push by famous successful investor Jim Rogers. Continue reading “North Korea – How to invest in North Korea – Part X”