Choson Exchange supports entrepreneurs and business-minded individuals in North Korea through workshops, internships, mentorships and scholarships inside and outside of the DPRK. We also help policymakers, researchers and international media understand North Korea’s business and economic environment through on-the-ground research
Guest Post by Tay Tian Wen, Analyst at Choson Exchange
In theory, any discussion about real estate in the DPRK would quickly fizzle out before it even begins. Why talk about real estate in a state that is ideologically opposed to private property ownership?
Because both President Trump and Marshal Kim Jong Un have already made it a point to. In his remarks during the June 12th Summit in Singapore, President Trump lavished praise on the DPRK’s real estate potential; In May 2018, Kim Jong Un commissioned the construction of a world-class beach resort in the Wonsan - Kalma Coastal Tourist Area. The message here is unambiguous -- real estate holds a lot of promise for the DPRK’s growth prospects.
Beyond individual vision, real estate in the DPRK is a highly nuanced topic that has witnessed transformative trends since the 1980s. Yet perhaps more interesting than what these trends are, is why these trends are happening. How did real estate in the DPRK come about in the first place? Why has there been a surge in real estate investment in the DPRK? How will this affect relevant industries? These are but a few of the many questions our insight series on real estate in the DPRK seeks to answer.
In the first instalment of this 3-part series, we take a look at a brief history of real estate, and one way in which a real estate project can be undertaken in the DPRK.
The Origins of Real Estate in the DPRK The use of the term “real estate” in the DPRK apparently started to gain traction only in the 1990s following what particular observers have denoted as trends towards a limited “economic opening”. While real estate in the DPRK have certainly become more visible in the 1990s, it was developments as far back as the 1980s that are more significant in explaining the evolution of real estate in the country.
In principle, all costs incurred over the duration of a construction project have traditionally been covered by the state, and private property ownership is still forbidden by DPRK law. Growing economic pressures in the 1980s, however, placed significant financial strain on the state’s ability to finance these construction projects at the national level, and eventually it was decided that part of the financial burden should be shouldered by “institutional enterprises” at the district level.
These “Institutional enterprises” are essentially run by individual state ministries or agencies that have excess financial capacity. Some of these “institutional enterprises” did not specialise in the construction industry, but possessed more than sufficient funds to finance construction projects in their respective districts. These “institutional enterprises” oversaw the construction of housing for their employees, so much so that the cumulative growth in residential developments could apparently accommodate the sudden increase in housing demand as post-war baby boomers in the DPRK reached marriage age. Since the central state body was no longer the sole authority in deciding and authorising real estate projects, there was a degree of decentralisation within the formal, state-controlled command economy.
In the 1990s however, the collapse of the soviet bloc and sudden loss of financial support from the Soviet Union, coupled with domestic economic troubles, resulted in a debilitating double whammy against the DPRK’s economy. Where “institutional enterprises” used to take charge of legal, administrative and financial aspects of a real estate project, a severe shortage of funds meant that financing had to be partially solicited from “donations” via informal loans. “Donations” are then pooled together in a fund and used for material procurement, and because the “donors” comprise part of the overall input, they are often included in the construction process in a supervisory role. A example of this would be prospective home-owners in the DPRK whose “donations” partially fund the construction of their new homes: these home-owners, in their capacity as “donors”, act as supervisory oversight.
“Institutional enterprises” do not physically participate in the construction process; in their capacity as “executing companies” (시행사), they simply account for legal and administrative aspects and are held responsible for any financial liability. As “Executing companies”, they will procure the construction services of a contractor (시공사) , who undertakes the physical construction of a real estate project. In essence, there is a division of responsibilities between both public and private actors
Additionally, the enactment of the Housing Act (북한살림집법) in 2009 led to municipal governments conferring residency certificates (입사정) to “all residents”. These residency certificates allegedly do not expire, All property is still under state possession, but with the introduction of residency certificates private individuals in North Korea can engage in an indirect form of real estate transaction by buying and selling residency certificates. There are multiple accounts of what sort of property rights these residency certificates confer, but Andrei Lankov, a professor at South Korea’s Kookmin University and a leading authority on North Korea, asserts that North Koreans enjoy “[rights] to control and manage a property, to dispose of it … to derive an income from the property, and to restrict access to it”.
As real estate continues to evolve in North Korea, new possibilities arise. Real estate trends in North Korea are informed by exposure to best practices from around the world, and the North Korean experience with real estate (and urban planning) lend new insights to the broader discussion as well. Choson Exchange is a proud facilitator of this exchange of ideas: In our Real Estate and Urban development workshop conducted in July 2017, one of the winning ideas was a green building complex; our 2014 workshop in Vietnam also exposed participants from the DPRK to best practices in land-lease/sales issues and the wider scope of interconnected topics such as land planning, tourism development and regulations. Real estate in the DPRK is now a space shared between public and private actors, and the steady growth in local expertise provides optimism for a gradually mature real estate sector in the country.
Parallels with Chinese Real Estate
While the Chinese experience with real estate and property rights differs significantly from the DPRK, the two cases are not without similarities. In both China and the DPRK, real estate markets and the concept of private ownership only began to manifest in the early 1990s; in China’s case however, it should be noted that this only applied to urban land. A different set of rules govern rural land ownership, and delving into these rules will deviate far from the intended scope of analysis.
Additionally, private ownership of land is also prohibited in China and individual citizens may only obtain land-use rights which are valid for a specific time period (presently 70 years for urban land-use rights granted for residential purposes). These rights, according to China’s Property Rights Law, enable Chinese citizens to “legally possess, use, and benefit from property owned by another” - terms similar to property rights conferred to DPRK citizens. Chinese citizens, however, can also legally own residential spaces built on the land that is owned by the state; this only applies in a de facto sense for DPRK citizens.
The role of the state in managing real estate and private property rights has also seen similar shifts in both China and the DPRK. Just as decentralisation meant less state oversight in the DPRK, the trend in China was also towards less intensive “supporting and guiding” of private ownership and away from “supervising and managing”.
Another similarity between China and the DPRK is that property rights are physically conferred to private owners in the form of transferable certificates issued by local authority. It is unclear what sort of real estate transactions DPRK citizens can engage in; for the Chinese, real estate can be transferred by means of sale, as a gift or other legal means. In both cases, the transfer of land use rights also results in the simultaneous transfer of home ownership.
Real Estate Roles and Procedure in the DPRK
According to the definition of “executing companies” provided by the DPRK Institute of Social Science, “executing companies”:
(1). are obliged to ensure proper documentation of budget and design as well as timely funding of construction work
(2). are obliged to ensure quality of construction work
(3). can only collaborate with the contractor stipulated in the contract entered into
(4). will be held directly responsible for any liabilities incurred during the construction process.
Other actors, such as specialised design agencies, construction contractors and individuals engaged in informal loans, provide the relevant inputs and are all coordinated by the “executing company”.
As stipulated by the 2009 Housing Act (북한살림집법), one possible procedure for a construction project in the DPRK is as follows:
(1). The state will select an “executing company” to undertake a particular construction project
(2). The selected executing company will then seek approval to proceed with the project from relevant government organisations. In order to secure approval, the executing company must obtain a land use permit and construction permit. The construction permit lays clear key specifications of the construction project.
(3). After the executing company obtains the relevant documents and is approved to proceed with the project, it then goes to a specialised urban construction design agency and enters into a design contract.
(4). After the design has been approved by the National Construction Supervision Agency, the “executing company” will enter into a contract with a contractor providing construction services (시공사).
(5). During the construction process, both the contractor and the “executing company” will conduct routine inspections to ensure construction quality
(6). Upon completion, the “executing company” must submit an application for a “completion inspection” by the National Construction Supervision Agency. The agency will only issue a “Notification of Acceptance” if the project satisfies inspection standards. At the same time, documents such as the land use permit, construction permit, geological survey reports and design drawings must all be handed over to the state.
In summary, real estate in the DPRK comprises a network of public and private actors engaged in a division of responsibilities that is determined and coordinated by the over-arching authority of a state-selected “executing company”. Ambiguity is done away by a clear assignment of responsibilities, and a proper procedure to follow. While there is a historical trend towards greater private participation in real estate projects, it remains to be seen if private individuals will more deeply involved in future.
In the next part of this series, we examine factors that explain real estate pricing and investment in the DPRK, and highlight where real estate investments in the country are concentrated in.
북한 부동산 개발업자의 등장과 함의에 관한 분석: 중국 부동산 개발업자와의 비교연구를 중심으로, Jeong Eun-Yi; North Korea Economic Review
북한의 무역과 산업정책의 연관성 분석, Korea Institute for International Economic Policy
I have always found it difficult to describe myself. The closest word might be “contrarian”. The tried and tested aren’t for me. I don’t have the qualifications, right connections, and showmanship to thrive under the glare of the media. I am more of an off-the-beaten track, behind-the-scenes sort of guy. When the masses flock to a destination, I run far, far away.
When you tell me, this is a place that hardly anyone has been, I start packing my bag.
The Choson Exchange DPRK Economic Forum in April this year caught my eye. From 20 – 27 April 2019, a group of foreign business experts who were interested in sharing their expertise and experiences with North Korean entrepreneurs were given visas to travel to Pyongyang. Throughout a 4-day programme, these people keen to know and hungry to share information with the North Korean participants had the stage.
Photo: Gonzalo Muñoz Robledillo
I was one of the speakers and my chosen topic was business opportunities in an emerging market . My career spans several decades of working in real estate and investment, so I felt I had something to offer from my experience here.
Photo: Ian Collins
When I finished my presentation, three groups of North Koreans approached me. They were eager to know more and how I could advise them with their real estate projects. And over the next few days, more groups sought me out and spoke to me about my experience in finding capital investment. They were particularly interested in infrastructure developments like hotels, ports and tourist resorts, a current priority for the North Korean government. I felt a real hunger for growth and change in the country.
That wasn’t so very different from when I first arrived in Myanmar eight and a half years ago. Initially, everything was unfamiliar, but by the eighth year, I was embracing every opportunity. I was glad I saw it through.
The DPRK is the last frontier left in Asia, and to me it felt to me like a country on the brink of change. At this moment, everything seems unfamiliar, even strange. But that could change very quickly. Like Myanmar, I feel that the politics, the people and its culture have not always been portrayed accurately by the international media.
Photo: Sergi Giménez Palomo
The Choson Exchange DPRK Economic Forum was in April 2019. Choson Exchange’s next forum is in August, and then they will return again in November. For my part, this was an excellent opportunity to find out more about a country that is largely misunderstood. This is your chance to hear it from the experts, and get a glint of the North Korean people and its culture, first hand. There is no country like North Korea now, and there probably never will be again. This was my first trip to North Korea, but I will be going back.
Beyond the forum, I am looking at the long term. As and when the country opens up and sanctions are lifted, I want to be a conduit for foreign businesses and the local experts. I have deep contacts around Asia to help the country in real estate, infrastructure construction, education and media. I will set up a base in Dandong China, the nearest border town to Pyongyang across the Yalu river. It’s a case of wait and see, and having the patience to take the time to learn about the place and its people- but once this mysterious country opens up and sanctions permit, I will be there.
This year’s St Gallen Symposium topic was on Capital for Purpose
The St Gallen Symposium is an international conference organized by the St Gallen Symposium Foundation with the generous help from generations of St Gallen University students (who take a year off to help organize the program). It is a unique event combining not just high profile guests, but also the inquisitive nature of the 200 young students and adults under 30 whom Symposium sponsors to attend every year. With a strong ethos of intergenerational dialogue, this event is truly unique. This year’s topic was “Capital for Purpose.” The Symposium is chaired by Lord Griffiths, vice-Chairman of Goldman Sachs International, and Dominic Barton former Global Managing Director for McKinsey & Co. Every year, Singapore sends a high level delegation who spend significant amount of time mingling not just with senior executives and politicians at this event, but also with the students and younger adults. This year, Deputy Prime Minister of Singapore Heng Swee Keat attended the Symposium, alongside many other senior business, economic and political leaders from around the world.
Dominic Barton, Chairman of the St Gallen Symposium and former Global Managing Director at McKinsey gave a warm welcome to Choson Exchange volunteers and our DPRK guests. We are joined by St Gallen Symposium Foundation staff who helped us make this dialogue happen.
We are proud to have brought DPR Koreans to participate in a historic first at the St Gallen Symposium. This marks the first time we have brought Koreans not just to Switzerland, but to engage in an economic dialogue at a prestigious international event. The Koreans did not just listened to the interesting sessions at the event, but also mingled and discussed topics with fellow participants, met with a number of Choson Exchange alumni or friends at the event (who helped our Koreans feel comfortable at this event), and even hosted a session moderated by Choson Exchange on the topic of “Change” in DPR Korea. The interactions were helped greatly by the warm, open and relaxed atmosphere at the Symposium.
We are proud to have partnered with the St Gallen Symposium to make this happen. We hope that Koreans can continue to attend the Symposium and this unique event can become an open platform for DPR Korea to engage in consistent economic dialogue with the international community going forward, both learning from ideas from around the world, and also contributing their perspective on a vision for DPRK’s interaction and place in the world.
Thank you to all our partners who helped make this new platform for economic dialogue with DPRK possible.
The wonderful ASEAN folks who accepted our DPR Koreans as honorary Southeast Asians during this event!
Josselin, a consultant from Switzerland, joined the November 2018 Pyongsong startup festival organized by PY Ventures as a sponsor and organizer, and Choson Exchange as a platform partner. He gave a presentation about the business implications of building a music festival, based on the famous Business Model Canvas that he was taught by its designer at the University of Lausanne. In this report, Josselin summarizes his personal experience in the DPRK.
Meanwhile, we are busy preparing for the Pyongyang Urban Innovation Week from August 3-10, which will focus on business, entrepreneurship and design. Please get in touch with us by May 31 if you’d like to join us in Pyongyang.
When my friend Julian told me about this trip to North Korea (DPRK), I was directly interested as I have a peculiar passion for special places, and the implications of the politics of such places for people’s lives. What a better place to indulge such a passion than the DPRK? It’s a secluded country about which a lot has been written and said… but very few people actually know what is going on there. This was a perfect occasion into which I rushed as quickly as I could! I was put in contact with Ian, who was organizing the trip, and honestly, when I saw the time and energy he put into it as well as the donation that was required… I thought it was a scam. I have never been so wrong in my whole life! This trip to the DPRK was the experience of a lifetime, on so many levels. For this blog post, I will limit myself to the workshops, the feeling in the country, and finally the people.
First of all, the Startup Festival was the masterpiece of our trip. We spent four days in Pyongsong, giving us a unique opportunity to see areas outside of Pyongyang, where foreigners usually stay. We had the privilege to speak to and work with a crowd of about 100 local entrepreneurs at the State Academy of Sciences, who had already developed some business ideas on their own. We started by holding eleven workshops on various topics, from AI to the basics of marketing and design thinking, in order to lay a good theoretical ground with our entrepreneurial partners. In a second phase, we assisted them with building their startup, based on the Business Model Canvas. We coached them. Finally, all teams prepared pitches and presented them to us workshop leaders. We then graded all pitches and selected a few winners, who were treated with Swiss chocolate that we had brought from abroad! Generally, this whole Startup Festival was extremely rewarding for both parties: for us workshop leaders, it was an honor to be able to share our business capabilities with people who have such a thirst for knowledge. We also believe that our help was invaluable for the participants, as we later found the skin cream that won last year’s Startup Festival in malls and hotel shops in Pyongyang!
“This Startup Festival was extremely rewarding for both parties”
With regards to discovering a new country, this trip was also a unique getaway to somewhere extremely new: there is no place in which socialism is so prevalent. Even other nations cited by our Korean partners as having a similar ideology, such as Vietnam or Cuba, are not anywhere close to what can be witnessed in DPRK. Being in this country feels like being in a movie, with magnificent buildings, massive squares and old-fashioned cafés. Most of the things that can be seen in the mainstream media do not quite match the reality in the DPRK, especially when one can witness it firsthand. The people taking the metro are not actors, just people going to work. There are not only twelve haircuts authorized by the Great Leader, just some billboards with suggestions at the barber shops. I could go on and on… the DPRK provided us with delicious food, amazing sights, surprising events (such as this “motivational dance” with drums at 7am on the square next to the hotel), and extremely interesting visits of local landmarks and attractions (such as a packaged food plant with a swimming pool on top). It was, simply put, filled with lots of fun and learning.
Finally, the people I had the honor of meeting there were surely the highlight of my trip. I have already touched upon the entrepreneurs participating in the Startup Festival, about which I want to emphasize the motivation and interest to learn about business principles, and the enthusiasm they put into the whole program also ended up motivating us! Secondly, the DPRK delegation accompanying us was composed of brilliant people: a Cambridge-educated doctor, as well as stem cell researchers. The endless discussions about almost anything we had with these three people will stay as a highlight of my trip. Their English was perfect, enabling them to provide us with the most valuable insights about their country. They became the face of DPRK to us. Last but not least, the delegation I was a part of was one of the best teams of people I ever had the chance to meet. Hailing from nearly every single continent (just missing Latin America!), this team of 16 was composed of people with extremely varied backgrounds, a great outlook on life and an insane sense of humor, giving us inspiring conversations, tons of fun at the hotel karaoke and mind-boggling conversations about the effects of the DPRK political system.
“The discussions about almost anything we had with these people will stay as a highlight of my trip”
Generally, this trip to the DPRK with organizer PY Ventures and their implementing partner Choson Exchange has been a fascinating experience, and an ideal opportunity to discover one of the most curious countries on this planet in a setting totally different to the usual tourist one, which is secluded on an island hotel and always accompanied by local guides. We had more freedom, making our own way (to a certain extent) through the city of Pyongyang and discovering its wonders and specialties. The team is the best, made of great people who know the country very well and who have built a long-standing trust relationship with local DPRK partners. This relationship is extremely valuable to the workshop leaders, giving them a unique possibility to discover and wander! I can only recommend taking this trip to the DPRK, as the mission of the organization is extremely precious to these entrepreneurs, and the trip is a must do.
PY Ventures was originally founded to support the development of Unjong Park and to take a direct approach to supporting startups in the DPRK. With the imposition of sanctions, those plans have been delayed to when regulations permit such activity. Working with Choson Exchange, it has supported and sponsored some workshops at Unjong Park.
One hundred and twenty seven of the world’s most promising social activists, business leaders, public servants, artists and technologists under the age of 40 have been invited to join the World Economic Forum’s community of Young Global Leaders. They are pushing boundaries, achieving firsts, and breaking traditional rules to improve the world.
The Forum of Young Global Leaders is a diverse community of leaders from all walks of life and from every region of the world. Current members lead governments and Fortune 500 companies, hold Nobel Prizes and Academy Awards, and have become UN Goodwill Ambassadors and Social Entrepreneurs. The community aims to bring together individuals with different skill sets from exciting fields to shape an inclusive and sustainable future for the world.
For us, this is an opportunity to raise the global issue of North Korea at the World Economic Forum, and to encourage individuals from that community to contribute their ideas, voices and actions to the long, difficult and continuing challenge on the Korean Peninsula. We expect the period ahead to continue to be difficult so long as the US and DPRK are unable to reconcile their differences. And post-reconciliation, there will be the difficult task of integrating and developing this country to ensure stability. Read Geoffrey’s call here on the World Economic Forum’s blog for more direct people-to-people exchange between individuals outside and inside North Korea.
But after more than a decade in which we have taken close to 200 volunteers to North Korea to train more than 2,000 North Korean researchers, policymakers, entrepreneurs and businesspeople, I have found a country that - as difficult as it is to work with - is full of individuals with aspirations, ambition, entrepreneurship and ideas. Strange as it might be to some, many of the Koreans we interact with - elite or otherwise - debate and disagree on policies; they want their countrymen, families and children to live better lives; and they hope to travel. It is not a monolithic country. People we teach in one department, company or province have different ideas about what reforms are needed to better the economy, or how their country should interact with the world.
With all eyes on the second US-DPRK summit and its impact on North Korea’s development, Choson Exchange has completed a major research project on Pyongyang’s rapid urban transformation over the past six years.
Led by Choson Exchange associate Calvin Chua, who has trained DPR Koreans in the urban planning and real estate sector, the project tracks Pyongyang’s urban development through cartographic mapping and simulations. Chua also surveyed more than 60 locals on the perceived pros and cons of their urban environment. Participants were asked to rank 38 factors related to transportation, energy & environment, educational infrastructure, convenience facilities, public spaces, production spaces, and healthcare infrastructure.
Three key insights from the survey were particularly interesting:
A three-fold increase in urban density of new residential streets reveals an appreciation of the importance of real estate land value
The importance of regenerating neighborhoods that are aging and not well connected to the city centre
The survey affirms the positive urban planning legacy of well-distributed public facilities throughout the city. There is also an aspiration in having a quality living environment that offers more than basic amenities
Based on this research, Chua recommends three projects which would shape the physical urban environment to allow businesses and entrepreneurs to thrive: The regeneration of Kwangbok and Tongil Street residential area, the development of Southern Taedong District, and the distribution of incubator spaces throughout key areas of the city.
The real estate and urban planning sector continues to be an important area of focus for Choson Exchange. A CE program in Hanoi in 2014 led to the passing of a real estate and property law for the DPRK’s Special Economic Zones. Building on the interest from DPRK partners, Choson Exchange will be organizing the Pyongyang Urban Innovation Week in August. If you have expertise in this field and would like to join this event, please contact us today!
Choson Exchange staff will be available to share DPRK insights and expertise in Hanoi from February 26-28 during the US-DPRK summit. For media inquiries, please contact us at firstname.lastname@example.org
Hanoi just ushered in the year of the Golden Pig. We took this from the picturesqure walk around Hoan Kiem lake in Hanoi this week.
The North Koreans we have brought to Hanoi have always reacted with a mix of curiosity and skepticism towards Hanoi. For those participants who remembered the bicycles that ply the streets of Hanoi and now see motorbikes everywhere, it is an amazing change. Compared to the organized and planned nature of Pyongyang City, the chaos of Hanoi is bewildering and confusing. Many of them seem more similarities with Singapore, where the heavy planning hand of the state is more visible. But there is a visible frenetic energy to Hanoi city that we hope the visiting North Korean leadership delegation picks up on at this upcoming Hanoi Summit.
Mapping out where the North Koreans will go and what they will do will not be easy. Unlike Ho Chi Minh City, Hanoi has a very dispersed urban landscape. There is a central government complex which will definitely host a state visit for Kim Jong Un. This is centered around Ho Chi Minh’s Mausoleum (see map). The Pullman Hotel is nearby. The Opera House is beautiful, and the new parliament building is impressive too. You can find the DPRK embassy nearby in the embassy district. The Metropole Hotel is swanky and President Trump stayed here for his last visit to Hanoi.
Remember the city view Kim Jong Un had from the top of the Marina Bay Sands last year? It would be good for the Koreans to get a city view to see how Hanoi has developed. Fortunately or unfortunately, depending on your perspective, some of the best views are on buildings built by South Koreans - these include the Lotte Center and the Kaengnam Landmark Tower. A little awkward for the North Koreans, but could be a good nod towards investments from South Korea.
From a security perspective, the Sheraton and Pan Pacific located in the upscale residential West Lake area are good locations for staying/meeting. They are a little more isolated and located north of the main government complex with a long commute with traffic downtown. But for a major event like this, it is not inconceivable that the main road downtown along the lake will be restricted if delegations stay on this side of the city.
For the Summit Period, we will also be stationing a team on-site for Feb 26-28 at the Summit location.
It has been announced that the next US-DPRK Summit between President Donald J. Trump and Chairman Kim Jong UN will take place in Vietnam - our internal betting pool still points to Danang with Chairman Kim visiting Hanoi separately. This is great news to us. Since 2014, we organize training workshops on economic policy, entrepreneurship and women in business in Hanoi, Halong Bay and Ho Chi Minh City in Vietnam for DPR Koreans, and established an office in Vietnam in 2016. We also advised the Danang local government on the development of a public-private partnership: the Da Nang Business Incubator, or DNES.
Given our observations, we believe that Vietnam’s development experience is highly relevant to North Korea. We hope this short primer will give some insight to the visiting media covering this Summit.
The US approach to the DPRK is one of “maximum pressure” (i.e. sanction) with its flipside being inducement: denuclearize, rejoin the international community and you can develop your economy. Vietnam is symbolic as a country that fought a war with the US, patched ties with the Americans, opened up to the world, andmade its mark as one of Southeast Asia’s fastest-growing economies. The US would like the DPRK to look to Vietnam as an example of what could be.
For the DPRK, Vietnam provides the security and proximity needed to organize logistics for a senior DPRK delegation. Ideological ties remain between Vietnam and the DPRK, with older Vietnamese having learned that the DPRK was one of their “brothers”. As such, the DPRK considers Vietnam a neutral or friendly ground for a meet, again emphasizing ASEAN’s role as an important mediator. In December last year, DPRK Foreign Minister Ri Yong Ho visited Hanoi and Halong Bay. For Kim Jong Un, Wonsan has been a signature economic development project and Halong Bay has often been referenced in the DPRK as a model for Wonsan. Since 2014, several DPRK delegations have visited Halong Bay seeking insights into growth and development. Choson Exchange is proud to have brought one such delegation to Halong Bay in 2014.
South Korea has sought to encourage the DPRK to understand Vietnam’s Doi Moi policy of economic experimentation, with the hope that the DPRK follows in Vietnam’s footsteps.
DPRK and Vietnam Ties
Political ties remain warm, with Chairwoman of the National Assembly Nguyen Thi Kim Ngan being the most senior point of contact with the DPRK. Chairwoman Ngan visited the DPRK for the 70th Anniversary of the Worker’s Party of Korea (WPK) in 2016 as a guest-of-honor, sharing the dais with Chairman Kim Jong Un. However, economic ties have not been particularly vibrant, possibly because of overlapping exports and poor trade complementarity until recent times (e.g. coal) and Vietnam’s close economic ties with South Korea, which discouraged economic relationships between Vietnam and the DPRK under the last South Korean administration. Ties were further strained by the involvement of a Vietnamese national in the assassination of Kim Jong Nam in 2018.
Some in Vietnam fear that a DPRK opening could lead to a reduction in South Korean manufacturing jobs in the country, These fears aside,The Vietnam-Singapore Industrial Park (VSIP) in Binh Duong is also regarded as a model of interest to Gaesong in developing the Gaesong Industrial Complex.
There used to be DPRK-run restaurants in Hanoi (Binh Nuong Quan) and Ho Chi Minh City. The restaurant in Ho Chi Minh City shut down in 2017 as the flow of South Korean visitors dried up under South Korea’s pressure campaign.
There is a memorial in Hanoi commemorating the aid rendered by North Koreans to the North Vietnamese government during its war against the South.
Choson Exchange in Vietnam
We organized our first program in Vietnam in 2014, bringing a delegation of policymakers, academics and researchers to Hanoi and Halong Bay to understand property development and real estate laws. Six months after the trip, the DPRK passed a real estate and property law for its Special Economic Zones, allowing the long-term lease of land within a price band.
Since our first program in 2009, we have had Vietnamese experts and volunteers join us in the DPRK to share their experience 10 times, reaching 500 participants in all provinces in North Korea, but most notably in Wonsan.
In 2016, we established our office in Vietnam in Ho Chi Minh City for the following reasons: (a) lessons the DPRK can learn from Vietnam’s Doi Moi economic policy, (b) the entrepreneurial energy in Vietnam and more specifically (c) the success of female entrepreneurs in Vietnam.
In 2017, we brought another delegation from the DPRK to study Vietnam’s accounting and audit system for private enterprises. In 2018, insights gained culminated in tangible change when the DPRK passed new accounting regulations.
We remain committed to programs in the two host countries for our offices: Vietnam and Singapore. Since 2009, we have trained about 2500 DPR Koreans in economic policy, business and entrepreneurship. Last year, we brought 30 volunteers to train 296 DPR Koreans in three programs in the country, and one overseas program.
Please check out other media materials on our webpage:
Annual Reports and Research Reports - Our 2018 Annual Report will be out February 16. We will also publish a study done last year on Real Estate and Infrastructure in Pyongyang by February 24, conducted by our colleague Calvin, who has led work training DPR Koreans on Wonsan’s development and bringing them to Halong Bay.
2014 Choson Exchange visit to Halong Bay to help DPR Koreans developing Wonsan to understand Vietnam’s development experience
A Belated Happy New Year from the team at Choson Exchange! Since the success of our Pyongsong Startup Festival in November last year, we plan to forge ahead with innovative new formats in 2019. Kicking off this year's initiatives is our inaugural DPRK Economic Forum in Pyongyang.
Held from 20th to 27th April this year, the DPRK Economic Forumwill include three days of interactive business trainings where workshop leaders will not only teach but also interact with locals whose entrepreneurialism have left an indelible impression on past workshop leaders like Julian Rossy and Laura Ashton. These entrepreneurs are hungry for success, and they rely on the skills and knowledge we bring them to help them take on the challenges of building successful businesses in a very difficult environment. If you have a background in marketing, finance, management and other related fields, join our DPRK Economic Forum to not only share your skills, but meet other distinguished professionals in your field and beyond!
Applications close on 19 February 2019, so kindly respond to us if you are interested. Please note however due to present restrictions that we are still unable to bring citizens of the United States, Japan and South Korea on our programs.
As Marketing Director and chief client growth officer at Xunama, Laura Ashton joined our November 2018 Pyongsong Startup Festival as a workshop leader. A global leader in marketing, Laura frequently shares her insights and observations at public events. From a gradual shift in packaging formats to curious revelations of a physical app store in Pyongyang, Laura scrutinises many aspects of consumer marketing and entrepreneurialism – and finds reason to be hopeful about their prospects in the DPRK.
In a classic Merrie Melodies cartoon from 1955, a joyous, top-hatted dancing frog gets discovered in a demolished building’s cornerstone and later locked away again, only to emerge singing the same toe-tapping tune in the far future. A perfectly preserved time capsule. Such rare finds in the real world can teach us something of the thread that runs from the past to the present and on to the future.
For marketers in today’s omnichannel, always-on, data- and ROI-driven marketing landscape, such a perfectly preserved time capsule is North Korea. Advertising and the internet are essentially unknown and people are only just beginning to experience a late-90’s budding digital curiosity.
I recently spent a week in the Democratic People’s Republic of Korea (DPRK) with the Choson Exchange, where I volunteered to teach marketing and coach entrepreneurial skills to a group of 100 engineers and scientists from the State Academy of Sciences in the Unjong Park Special Economic Zone, 50 kilometers from the capital in Pyongsong.
Consumer marketing currently operates in the absence of advertising, of internet access and, generally, of knowledge of foreign brands. Yet consumerism and entrepreneurialism are on the rise. In this short article, I pry open the DPRK consumer marketing cornerstone to share my reflections on some CPG categories, packaging, promotion, pricing, premium retail and the fledgling ecommerce channel.
Politically, socially and economically isolated for decades, DPRK remains subject to strict international sanctions and there is virtually no exposure to foreign businesses and ideas. For citizens, even travel between cities requires a permit. The government network of ministries and institutes owns the land and buildings, the means of production, the market channels and provides employment. Interestingly, in recent years individuals have been allowed to create small businesses using the government premises and retain the profits for themselves. It is this tacit support for entrepreneurialism that stimulating the growth of small domestic businesses.
So what can a marketer see in the Hermit Kingdom?
North Koreans have never been exposed to commercial advertising. Political propaganda posters and heroic monuments abound. The only two advertising billboards I saw in Pyongyang were for the same government JV automotive manufacturer: a tree-obscured car billboard on the way from the airport and another for minivans adjacent to our riverside hotel (below). The streets are all but empty of cars (except for the three-hour traffic jam we enjoyed during the Cuban President’s visit), so those billboards are more about pride and power than persuasion. The Korean newspaper, the Rodong Sinmun, whose title translates as “The Workers’ Newspaper” appears to carry no commercial ads, I noticed while watching commuters reading the daily on the subway station platform.
Retail categories, brands and sales promotion
In Kwangbok Department Store, where hundreds of locals and not more than a handful of foreign visitors were shopping, I was able to change some US dollars (or Euros or Renminbi) and pay in local Won. Incidentally, the official rate that applies in hotels, the airport and other official locations is 100 Won to the dollar. The unofficial rate, which we could have in the store, was 8000 Won to the dollar.
Photography was frowned upon, so I had to be discreet, hence the imperfect shots that follow. Only once was I asked to stop—while investigating some rather uncontroversial-looking pot noodles.
Global sanctions mean that the usual parade of international brands is unavailable. The vast majority of products are from North Korean government factories and, through the porous border, from China. There is the odd opportunistic listing, from Vietnam or Russia.
The frozen-in-time aesthetic that is associated with public propaganda posters has begun to disappear from product packaging. Elite consumers have a good choice of DPRK- and China-made products in reasonably modern packaging, sometimes copying the look of popular and aspirational South Korean brands.
Local production has in the past been done in joint ventures with Chinese companies, although as China is more respecting of sanctions, fewer of these are visible. Chinese investment is more surreptitious. For example, I was told that the supermarket we were in used to be overt about its Chinese JV status; now it has taken down the Chinese writing on the front. Given the continued importance of discreet cross-border trade, it would seem that China can be expected to have a disproportionate influence on the shape of branding and retail shopping until and after sanctions lift.
I was surprised to find shelves stocked with 26 brands of toothpaste, almost all from the DPRK, ranging in price from 4,500 to 25,000 Won. At the high end, ginseng and aloe vera varieties with attractive pack graphics aimed to appeal to local tastes and referenced traditional medicine. In this store, most of the more interesting varieties belonged to one of two manufacturers, Rainbow and Red Bird. Cheaper toothpaste options mimicked Colgate colours—although this nuance would be lost on consumers since international brands are simply not present. The range of choices and prices highlighted that even in elite Pyongyang—to say nothing of the rest of the country, home to 85% of the population—there is a significant gap between groups of consumers. Not something I had expected.
In the dishwashing, fabric care and feminine hygiene sections, there was a profusion of colourful packages, with brands from DPRK and China and one dishwashing brand, Apolon, from Russia.
In the China-dominated soya/seasoning sauces sections, some unofficially imported Maggi bottles from Vietnam were the only global brand on shelf. A Vietnamese brand also appeared in the disposable diaper section.
There were generally no promotional materials in the store: no shelf talkers, posters or sale signs.
Medical supplements were the standout exception. Customers shuffled through laminated A4 colour sheets extolling the features and benefits of various medicines and supplements that were spread across the glass counters of the pharma department.
Earlier, in a smaller shop selling supplements and ginseng products, I spotted large, full posters in Korean, Chinese, Russian and English making remarkable medical claims (ie, curing cancer, raising IQ, eternal youth, and so on). I didn’t check the prices, but they would have been cheap at any price—if they delivered on their promises! The same products were promoted on our international Air Koryo flights by flight attendants pushing trolleys along the aisle with product and posters, a practice that has been started just in the last year, I was told.
I expected to see and did see grocery sections with fresh meat, fish, eggs and dairy, but I was surprised by the selection of ready-made dishes. Multiple family incomes are common in the capital and time-poor Pyongyangites are increasingly able to buy freshly prepared convenience food from the department store. Chill cases were full that Sunday afternoon with clingfilm-covered foam deli trays of meatballs, seafood snacks and braised vegetables, many of them decorated with bits of parsley. My North Korean colleagues mentioned that dining out is an infrequent pleasure—enjoyed perhaps on a weekend or once every month or two. Take-away meals provide an occasional break or help add variety when family comes to visit.
I was slightly surprised by the abundance and apparent quality and would not assume that Pyongyang’s groaning shelves would be replicated anywhere else in DPRK, where millions of North Koreans do not have access to enough nutrition.
Later in my week in North Korea, we made a visit to the Golden Cup Foodstuffs confectionery factory in the outskirts of Pyongyang, not on the standard foreign tourist itinerary. A modern, multi-storey building with a high degree of basic automation, the factory produced snacks, baked goods and sports drinks. The latter were developed after Kim Jong Un saw some sports drinks officials brought back from overseas and requested that the factory reproduce them for Korean athletes and mass sale.
Home intranet connection is possible, although the cost can be an impediment, especially for those living on high floors, and adoption is still at an early stage. However, mobile phones were common among our senior participants; they had older-style phones and a few Korean-made Arirang smartphones, all government approved, with no Bluetooth, WiFi or international dialling capability. Apparently some newer models are WiFi-enabled (although no GPS); Pyongyang just introduced WiFi zones in late 2018.
The most curious aspect of being digital in North Korea is the app store. There are apps: rudimentary games, books and e-commerce apps, but no chat, social media or OTT services. If you need an app, you go to the app store. Except in this case, the app store is a physical place where a staff member takes your money, plugs a cable into your phone and adds the app to your phone in person. When an update is released, you need to travel again to obtain it—and your original version is usually rendered obsolete until you do so. Several people I spoke to during the week told me that they were lapsed users of ecommerce and other sites because of the inconvenience of refreshing app versions. Sadly, our group was not able to visit to the app store.
The online space is certainly DPRK’s ground zero for an emerging advertising culture. Rudimentary online shopping exists through multiple platforms. The most basic are simply promotional sites, showing models, styles and variants. To buy, the customer needs to visit a physical store. Some sites are functional lists, like the Man Mul Sang screenshot above, featuring wristwatches and generators, devoid of category management. Others have more international-looking pages including imagery that begins to look like unimaginative Western catalogues or trade ads. Last-mile logistics has not been commercialised yet, so many sites include a phone number to the seller, who will arrange for delivery.
I expect that online shopping is where we will begin to see the rise of creativity and differentiation in DPRK. Outdoor advertising and in-store promotion is probably too public a declaration of openness for fledgling entrepreneurialism. Online, even heavily censored, brands can begin to develop. Let’s watch this space.
Chinese influence, through imports and joint ventures, in the North Korean B2C and B2B arenas is intense. At some stage, sanctions will begin to lift and international brands will arrive. In the absence of advertising today, Chinese brands may not be developing a strong position, apart from habit. If promotion is allowed when the market begins to liberalise, overseas brands—particularly those from South Korea—may be able to make a fast impact. Oddly, foreign brands who understand the power of digital marketing may, although late to the party, have a first mover advantage by knowing how to leverage brand, online.
What is clear to me is that choice, competition and differentiation will only become stronger. During the teaching and coaching sessions I had with entrepreneurs at the State Academy of Science, my DPRK colleagues’ interest in marketing strategy, product design, consumer insights, pricing strategy and visual examples from all over the world of B2B and B2C marketing was intense, and they wanted to apply it to their own nascent businesses.
The North Korean consumer marketing time capsule feels like pieces of Asia 20 to 30 years ago. The government involvement and supply chain infrastructure of China, the double currency of Myanmar, the inter-regional travel permits of Laos, the sudden enthusiasm for colourful, modern packaging of Thailand and South Korea and the tentative curiosity about online of, well, everywhere in the mid/late 1990s.
Change is happening. Quietly and unofficially, the North Korean government is letting the entrepreneurial genie out of the bottle. Like the genie, even as the international community considers the choices relating to sanctions, the amusing cartoon frog that represents consumer demand for more-better-cheaper, won’t stay in its cornerstone time capsules for long.