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Candice Mak talks to one of only three foreign firms in North Korea about opening an office and doing business in the isolationist nation.

Tower of power: North Korea's government prefers its presence to be not just known, but felt.

Officials watching and reporting on your every move, national laws under lock and key... setting up a law office in the Democratic People’s Republic of Korea (DPRK), the world’s most politically-isolated country, is exactly the surreal experience you would expect it to be.

Sara Marchetta of Italian firm Chiomenti Studio Legale – which last month integrated Birindelli e Associati – knows better than anybody. As the manager of Birindelli’s Beijing office, she helped to establish the firm’s office in Pyongyang three years ago and has been responsible for it since then.

Although there are two other foreign firms – Hay Kalb & Associates and Kelvin Chia Partnership – with North Korean offices, Chiomenti’s two-lawyer practice is unique in being set up as a joint venture with the Korean Justice Committee (KJC), a government entity. And in highly-politicized North Korea, this recognition opens up many opportunities.

You first opened in 2005. Why did Birindelli (now Chiomenti) decide to open up in North Korea?
The story dates back to a few years ago. As a general approach at that time, Birindelli was extremely interested in certain countries in the Far East. We have never been interested in India, but we had been looking at Vietnam and at China from the beginning of the nineties. We got licences in the mid-nineties for both China and Vietnam and it was very natural for us to approach the other communist country in the Far East.

Actually we had been negotiating with the DPRK authorities to open an office there since the late nineties. At that time, we were talking to the ministry of foreign trade and for some reason it was too early, too complicated, and the negotiation failed.

In the second half of 2004, they got back to me through the embassy in Beijing and said: “Would you like to open up an office in Pyongyang?” and I said: “Yes, but last time we were not that successful in taking the negotiation on.”

And so they introduced us to this new partner – the KJC – and things worked out.

Did you face any scepticism?
Not that we noted. I would say that the only moment we saw that the government was nervous was when we took journalists to the office opening. That was the only moment when they were probably thinking: “Why did we do this?” But that was only for a few days.

As for myself, I was always very welcome and I’ve never had any bureaucratic problems getting a visa. So everything from my point of view went very smoothly. Even the negotiations to open up the office and to start up there lasted just a few months, maybe four months. Altogether it was very short.

Why is North Korea more open than South Korea in allowing foreign firms into the market?
The main point is you need to get authorization to work there, as you can’t just go there and open up an office. I think they [the authorities] allowed us to open there as they have been going through an economic reform. It has been stop-go-stop-go-stop-go, but still there is some economic reform. I think they knew that having foreign professionals who can advise on business deals is part of the game.

What are some of the challenges you face working in the DPRK?
The first issue is looking for legal sources – the law – as it is extremely complicated to get them. Even if you’re a law firm and have people who are well-connected, it’s still a very long process to get a copy of a law. Even if the law has already been enacted and should be public, you still need special permission. If the law has not yet officially been translated into English, then you need to obtain special permission to get it and to translate it.

The second thing is that the intended implementation of the law in a western sense does not exist. Especially when you go out of Pyongyang and Kaesong [North Korea’s special economic zone], everything is pretty much left up to political decision: whether you can stay there or not stay there, what you can do and not do...

Just to give you an example: in terms of corporate tax, you go to a place, make an investment and you pay a corporate tax even if you don’t profit. It’s sort of a tax for being there. Corporate tax ends up being interpreted as a presence tax, which is paid independently of whether you make profits or not. In a few cases, we did find this type of interpretation, which is obviously extremely bizarre. So it is really a matter of general legal culture – which is totally lacking – and education of the administrative middle-to-low levels.

"Implementation of the law in a western sense does not exist. Everything is left to political decision." -- Sara Marchetta, Chiomenti Studio Legale

The third thing is your contact with the country. It’s never a direct one as there is always some type of mediation. I don’t speak Korean; I speak Chinese and I have been staying in China for a very long time – obviously [in China] I have the sensation of what’s happening around me. While in the DPRK you have this sensation of not knowing what’s going on because of the language. Also you really have problems understanding what’s happening because people are reporting what you do during the day and night, and reporting what their colleagues are doing.

So there is a lot of activity around what you do, which is not something we’re used to. I came to China in the beginning of the nineties and it was already very different in this respect. You were not followed all the time; you were not together with people all the time; you were not together with interpreters or guides or business partners who gave you their version of what you saw.

Basically, [in North Korea] there is no direct contact with normal people.

Does this hinder getting a deal done?
Actually, yes and no. Yes in the sense that getting a deal done takes more time because you don’t have all the information available at the very beginning. No in the sense that once there is the intention of getting the deal done, there is a lot of facilitation from the bureaucratic and governmental point of view. If they say yes, it’s basically yes and it will happen.

See also: The other Korea: practising law in Pyongyang (part 2 of 2)

Tags: Asia-Pacific, Expansion and strategy, Features, Chiomenti, North Korea