North Korea’s business guides
Two years after Geoffrey See first visited North
Korea, the Yale postgraduate received a message from a Pyongyang government
official seeking his help.
It was near the end of 2009, soon after a currency
devaluation had virtually wiped out the savings of many North Korean small
traders. The reform was a disaster, prompting rare bouts of civil unrest and
the execution of the finance official supposedly responsible.
But the
request from Pyongyang provided a vital opportunity for Mr See, then 24, who
had already spent months seeking ways to run business training schemes in North
Korea. He now runs Choson Exchange, a non-profit group that has trained
hundreds of North Koreans in modern management practices.
“The currency reform . . . . made them aware that
there were a lot of things that they didn’t know about,” says Mr See. When he
received the invitation to organise a training programme on exchange rates, he
enlisted friends from banking and economic development agencies to run a
finance workshop in Pyongyang.
Since then, Choson Exchange has won the blessing of
its North Korean government partners to run training programmes – in both North
Korea and Mr See’s native Singapore – at growing scale and frequency. More than
180 trainees took part in the first quarter of this year alone.
The courses are designed to support North Korea’s
growing numbers of small-business owners, as the state shows increasing
flexibility towards breaches of its collectivist official dogma in its efforts
to revitalise a long-stagnant economy. Most Choson Exchange trainees work at
state companies or institutions. But others are running small enterprises,
typically restaurants or cafés, and the programme hopes to encourage more
Koreans to follow suit.
The sessions in North Korea involve a foreign
volunteer – usually an entrepreneur, or a marketing expert – giving a talk on
western business practices, with the aid of an interpreter.
“There’s a broad set of vocabulary that is missing”
where business is concerned, notes Andray Abrahamian, executive director of
Choson Exchange. “When the workshop leader delivers a sentence, the translator
might speak for a couple of minutes to make sure the message got through.
” Workshop leaders have lectured on topics from
corporate social responsibility to asset-liability management. Practical
exercises focus on skills that participants can use, from planning a business
strategy to practising catering to customer tastes with role-play drills where
they make paper toys for which they must find a buyer.
“What they
lack is what people pick up just by growing up in a western economy. Seeing
businesses succeed and fail gives an understanding of how customer
relationships work,” says Nils Weisensee, a Shanghai-based entrepreneur who
joined Choson Exchange last year.
Mr See worked at the consulting group Bain in Boston
for a year while getting Choson Exchange off the ground, and the training
programmes are suffused with modern business buzzwords, from lean production to
ecommerce.
Such terms sit oddly with North Korea’s official
ideology, which continues to praise the “monolithic leadership system” under
supreme leader Kim Jong Un. When Mr Kim’s uncle and top adviser Jang Song Thaek
was executed last year, his “decadent capitalist lifestyle” was cited among his
crimes.
Yet Pyongyang has been showing interest in foreign
practices as it battles to progress towards Mr Kim’s promised “thriving
socialist country”. North Korea’s ambassador to London, Hyon Hak Bong, told the
Financial Times in an interview this year of research visits to countries such
as Singapore and Malaysia to learn from their successful development.
“We want to learn from advanced economies but some
countries keep their doors closed,” he said. Analysts say the state’s
increasingly sanguine attitude towards the market is largely a pragmatic
response to a growing private economy that it was unable to suppress.
When the
state distribution system broke down in the early 1990s, famine forced people
to resort to private trade to survive. Now the network of black markets
continues to flourish, providing sustenance for millions of North Koreans. They
are usually ramshackle marketplaces, selling goods from foodstuffs to consumer
electronics.
Choson Exchange mainly helps upper-middle class
people who run, or hope to run, businesses in Pyongyang. Yet even these
relatively privileged entrepreneurs are on precarious ground in a country where
private enterprise remains officially off-limits. Most of their businesses are
nominally part of a state-owned enterprise: in practice, this arrangement gives
managers autonomy in running their business, provided they distribute part of
their profits to the state company.
“The legal framework in which they operate is
convoluted,” says Mr Abrahamian. Choson Exchange’s focus on business skills
contrasts with other North Korea-related charities that concentrate on helping
refugees from the country, or drawing attention to its appalling system of
prison camps and political repression.
But the full importance of Choson Exchange’s work
may become clear only after a North Korean transition to a truly market-based
economy, when it would be in dire need of people who understand modern
business, says Andrei Lankov, a professor at Seoul’s Kookmin University.
“They are one of a few groups doing something that
makes sense,” he says. “The only way to change North Korea is to expose North
Koreans – especially the elite – to some knowledge of the outside world.”
Choson Exchange tackles this in an unusually direct way: by taking its most
promising trainees to Singapore to expose them to the cutting edge of Asian
capitalism.
Permission – and resources – to travel abroad are
hard to come by in North Korea, even for Pyongyang residents. Most of the
trainees have never left the country, and even the exceptions have nearly
always been only to northeast China. Yet the organisation has been allowed to
take groups of North Korean public employees on seven trips to Singapore that
include tours of shops and meeting businesspeople and a member of parliament.
The city-state is “a fantastic platform from which to engage North Korea”, says
Mr Abrahamian, as it offers an example of an Asian state that achieved rapid
development while maintaining strong state control. Participants have been sent
out into a Singapore shopping district to compile a report using technical
marketing frameworks.
They are trained in online research – a skill that,
for now, they cannot use at home – and in creating a product brand, including
logos, slogans and voice-overs. The experience has been overwhelming for many,
says Mr See. “On the last trip, it was difficult to pull them out of shops.”
But there have been no attempts to avoid returning to Pyongyang.
“Some of them actually want to go home early,” says
Mr See. “It’s: ‘I have work to do, money to make.’ Busy business people are the
same everywhere.” Pyongyang’s initiatives to offer greater economic freedom To
expect “policy change” from North Korea, the country’s official media wrote two
years ago, “is nothing but a foolish and silly dream just like wanting the sun
to rise in the west.
” Yet while Pyongyang has angrily dismissed talk of
reform, it has been developing initiatives that give citizens and foreign
investors greater economic freedom, and drawing on lessons from abroad.
Pyongyang has experimented with schemes that allow
some farmers to keep a substantial share of their production, and it is moving
to grant more autonomy to the distribution sector, a senior official said last
year. It has also put growing emphasis on its embrace of special economic
zones, where foreign investors benefit from tax concessions – emulating an
innovation that jump-started China’s economic growth over the past three
decades. Last year North Korea announced plans for 14 new SEZs.
China and Russia have lent support to this
initiative, especially to the existing SEZ at the port of Rason, which was
connected to the Russian rail network last month. But many western investors
are waiting for the lifting of the extensive international sanctions against
North Korea before committing capital to the country, says Michael Hay, a
corporate consultant in Pyongyang.
