Print Email Comment

Candice Mak finds out which clients firms in North Korea are targeting, and how.

There's plentiful work beyond the red tape, if you dig around.

North Korea isn’t the easiest of places to be a lawyer. As we reported last week, even daily tasks – such as obtaining a copy of a law – can be frustrated by bureaucracy and constant mediation. The government monitors lawyers’ every move, and the need for interpreters adds to an air of confusion.

But beyond the red tape, we reported, lies a surprisingly efficient and helpful administration. And despite its political isolation, the Democratic People’s Republic of Korea (DPRK) has made several attempts to open up its centrally-planned economy to foreign investment, at least in principle.

The country has a wealth of natural resources, and the mining and retail sectors, according to Sara Marchetta of Chiomenti Studio Legale – one of three foreign firms in Pyongyang – provide opportunities for enterprising lawyers. This week, Marchetta explains how the firm has positioned itself to pick up this work, and gives her insights into the future of the North Korean market.

How big is your office in Pyongyang?
It is currently staffed with two people. We have no expatriates. It is a joint venture as we are there in cooperation with a DPRK government entity called the Korean Justice Committee [KJC]. It is equivalent to the Chinese Ministry of Justice.

Are your lawyers at the office North Koreans?
Yes, they are North Korean lawyers. One of them is a pure lawyer, the other one is more someone who is well-connected in the government and has also PR and English capabilities. One side has the legal knowledge, and on the other side, fluent English that they use to work with foreigners.

Does your joint-venture status with the KJC give you an advantage over foreign firms?
As a matter of fact, from an operational point of view: yes. From the client’s point of view, I don’t know. I have no idea. I don’t think this is something that is hindering the expansion of our client base in Pyongyang, but I am not sure if it’s enhancing it.

What type of clients do you serve?
We serve companies looking at setting up a presence in the DPRK. These are large companies that deal with natural resources, like mining or consumer goods, and most of them have already a presence in China.

Who else is investing in the DPRK?
The South Koreans obviously have a very favorable channel because they are in Kaesong with Hyundai. Gaefong is a Special Economic Zone, which is close to the DMZ [demilitarised zone]. Hyundai is making a huge industrial park. Whereas the South Koreans are providing the utilities – water, gas, electricity and oil – the North Koreans are putting in the labour.

Kaesong is a very special area and is an up-to-standard industrial zone, but other than this there isn’t much else. Well, there are other countries. You do have a few investments by British, German and French companies in mainly natural resources, mainly in mining, that we have seen.

What are the key sectors of work?
Well we deal mostly with mining projects. This means you go there, you test the product and if it’s okay then you give the technology to be extracted in a proper way. You do part of the processing of the mineral and export it. This is one deal. On the other side, before advising on an investment we advise our clients on processing contracts. Obviously this can be done not just for mining, but for shoes, clothes and any other product that can be exported. The deal structure is basically these two.

Looking forward, is there enough going on to fairly classify the DPRK as an “emerging market”?
Not in terms of domestic market. I don’t think that the domestic market is going to develop very much, but the DPRK is a good place for processing contracts. I mean, you send raw materials and they send back the finished product. There is also a strong market for natural resources and low-to-medium technology projects. There, you can produce basic chemicals, basic pharmaceutical products and some consumer goods. The Chinese are doing clothing here, doing shoes, and a lot of other things.

Do you predict enough work growth to expand?
Not for the time being for a number of reasons. One, we do not see an increase in DPRK-related work. We have two, three, four, maximum five clients a year and that’s basically it. So this is the main reason. Then you have always the political issue. It’s always there. The political wind is really swinging a lot and it changes by the season and is very much affected by the situation of the six-party talks. So for the time being, we are looking at what is happening and we’re doing what we can do, but we do not have plans to enlarge our presence in the DPRK for the time being.

See also: The other Korea: practising law in Pyongyang (part 1 of 2)

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