North Korea

Pyongyang Potential: Could North Korea's Economy Take Off?

With its mineral resources and cheap labor, the country has significant potential for growth, but economic openness could undermine its dictatorship.

A worker at the Kangso Mineral Water Factory that is shown to foreigners to display its modernized industries
A worker at the Kangso Mineral Water Factory that is shown to foreigners to display its modernized industries
Yann Rousseau

SEOUL — Last month, Ian Bennett hosted a start-up workshop in Pyongyang. Several times a year, the computer scientist travels to North Korea to run training seminars organized by the Singaporean NGO, Choson Exchange. The workshops feature foreign professionals introducing North Korean workers to marketing skills, economic analysis and sales techniques.

"There is a strong entrepreneurial spirit," says Bennett. "Many people who seek to develop these new skills have experienced famine in the 1990s, and now know they can't rely any longer on the state alone. Those who have not tried to fend for themselves in the past often die."

In an attempt to convince Kim Jong-un to quickly give up Pyongyang's nuclear arsenal, the US and South Korean officials like to point out the opportunities for growth and the examples of how Chinese or Vietnamese openness led to booming economies.

North Korea, after a relaxation of international sanctions, could wind up benefiting from development aid and private foreign investments to restore its obsolete infrastructure, its medieval agriculture, its mines and even to activate its tourist sector. "We could reconnect the South and the North ..., establish a community that will bring prosperity to both Koreas," said South Korean President Moon Jae-in.

In April, during his first major summit with Kim Jong-un, the South Korean leader also gave the young dictator a USB key containing a development plan for the entire peninsula.

With supporting clips and graphics, it proposes the establishment of at least three economic corridors linking the two nations and resurrecting several industries in the North. Reconstruction of the North Korean rail network would, for example, allow South Korean companies to have a new route to distribute their products elsewhere in Asia and Europe while offering Pyongyang an opportunity to open up its mineral resources.

Foreign companies have denounced the predatory ways of the regime and the absence of any stable legal framework.

According to the Seoul-based North Korea Resources Institute, North Korea has significant reserves of at least 200 minerals and metals. Behind China, North Korea is home to the second largest deposit of magnesite on the planet, but also huge reserves of tungsten ore, graphite and molybdenum. Its bedrock could also hide several rare minerals sought by tech giants. But due to lack of suitable technologies, modern transport networks and electricity, the country remains unable to exploit these resources.

Should some Chinese, or especially South Korean companies, such as Lotte or KT, have already expressed interest in these mines, agricultural regions or cheap labor North Korea, they would have no choice but to deploy very slowly within the country, which is unable to suddenly reinvent itself as a new Vietnam.

North Korean factory worker using a mobile phone that blocks access to the World Wide Web — Photo: Andreas Landwehr/DPA/ZUMA

The few foreign companies that have invested in the country during previous periods of appeasement of sanctions have denounced the predatory ways of the regime and the absence of any stable legal framework. The Chinese Xiyang Group lost tens of millions of dollars in an iron ore joint venture with a North Korean state-owned company, while the Egyptian firm Orascom, which built the first North Korean mobile phone network, said they were unable to get their full payment from the country.

To attract foreign investment, Pyongyang will need to radically reform its political and economic organization, which would prove to be a potentially dangerous next step for the Kim's regime, having been built against this very "imperialist capitalism" bogeyman. "There is a limit to the pace of economic reform," says Bennett, "to be able to also ensure political stability."

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