CEO Downplays N. Korean Business Ties

“Business should be conducted with North Korea with the realization that contracts with the country may become nullified at any time.”

Jeong Ju-gwon (55), CEO of Palette Co. that conducted business with North Korea for nearly twenty years, said, “South Korean businessmen look upon the task too easily.”

While working as head of overseas marketing division of Elcanto Co., he was in charge of the firm’s Pyongyang factory management for seven years from 1997.

Jeong advises that a sound knowledge of the differences in the business environment between North and South Korea is needed to succeed in business dealings with the North.

North Korean counterparts have almost no knowledge of the market economy system, so a different approach is needed. He advises that it should be acknowledged that North Korean business personnel may not know what South Koreans consider as elementary knowledge.

Jeong further advised, “Considering the bad electricity situation and low labor productivity, there is not much that can be done in North Korea.” He explained that factory infrastructure should be operated by the South Koreans, and difficulties exist in training North Korean workers, so that small-scale processing businesses are about the only feasible projects.

When importing agricultural products it is important not only to look at the sample but to check the products at the production site if possible. It should also be considered that on-site inspections may not be easy.

Difficulties in logistics should also be considered beforehand. At the moment, excluding Gaesong the only route available is shipping between Incheon and Nampo. Shipping occurs only once a month. All products should be shipped by South Korea, and the finished products are then shipped back, necessitating calculations of financial input considering the extensive amount of time and costs involved.

Jeong closed with an emphasis that South Korean businessmen should read the minds of their North Korean counterparts.

“North Korea does not function through policy, as it is a society that is controlled through people. The most important factor that will influence the success of your business is your sincerity when meeting with those in power.”

sunshade@donga.com