How to Succeed in Business in North Korea
International sanctions can’t compete against the ingenuity of North Korean entrepreneurs.
Two more rounds of United Nations sanctions against North Korea have been passed since the beginning of August, with restrictions or total bans on North Korean exports of iron, coal, lead, seafood, textiles, and labor, and on North Korean oil imports. The hope is these measures will bring North Korea to its knees, or at least to the negotiating table.
That’s fanciful. While North Korea will undoubtedly feel some pain, an economic collapse from sanctions is not going to happen, because the North Korean economy has evolved to withstand — and even thrive under — precisely such hardships.
It would be going too far to suggest that North Korea is booming under sanctions — there is extensive malnutrition, especially outside of Pyongyang, much of the internal transportation network is nonfunctional, and the famous satellite images of North Korea at night suggest that electricity remains a luxury in the countryside. Yet, according to the South Korean central bank North Korea’s formal economy grew at 3.9 percent last year, Pyongyang is experiencing a building boom, and North Korea somehow funds its current account deficit with China every year.
This is partly because, despite its international reputation as the Hermit Kingdom, North Korea is not actually that isolated. North Korea has long been a political pariah, engaging in provocative acts that undermine its position in the international community, but economically it has survived by plugging itself into the global economy in creative ways, and in building surprisingly strong trade networks with the outside world. North Koreans, from the bottom of society to the very top, are some of the more capable entrepreneurs in the world.
As a consequence of the great famine of the 1990s, when society was brought to the point of collapse and citizens were left to fend for themselves, North Korea has developed into a country where everyone is essentially out to make money by almost any means necessary to survive. Nearly every organization in the country — whether government or private — is a revenue-generator in some way and has evolved to evade sanctions, the North Korean government, the Chinese government, or all three.
At the top, the central state firms that are the target of U. N. sanctions because of their involvement in selling weapons overseas, and in bringing in components for the country’s weapons of mass destruction programs, have developed sophisticated methods of evading sanctions, including networks of ever-changing front companies with fake registrations, multiple bank accounts, and vague or misleading documentation.
North Korea’s diplomatic outposts around the world have become the locations for front companies and brokers for clandestine businessmen and shady deals. Perhaps most importantly, they have managed the impressive feat of getting non-North Koreans to evade sanctions for them. Foreign companies manage nearly all buying and selling and handle the logistical chain around the world up to the North Korean border, so that the North Korean role is impossible to track without extensive investigations. North Koreans themselves are left only with the task of figuring out how to transfer money and pick up or send off the goods at the border.
At the bottom, North Koreans have built up small private, unregistered businesses, buying and selling wares in private marketplaces and engaging in their own foreign trade, largely with China and South Korea. In North Korea, everything is for sale, including status as a state company: Because North Korea continues to ban private enterprise, private companies masquerade as state-owned companies, with the original owner being hired as a manager by the cooperating state official, and thereby gain political protection for a fee and a cut of the profits.
