So, what’s up? Any North Korea news lately? Just kidding. Like all Korea-watchers we’ve been consumed by the ouster of Jang Song Taek, coming up with theories and explanations, some of which we might put in writing.
For now, one small thing we’d like to zoom in on is the issue of investor perception. We sensed some positivity in recent months, with provincial officials hoping for a positive political environment now that the ugliness of Kaesong’s closure was beginning to recede.
One of our constant messages in Choson Exchange trainings has been that for the DPRK to get beyond Chinese investment and find businesspeople from elsewhere in Asia or from the west, stability and predictability are key. Otherwise, even as they fret about their increasing dependence on China for their economic relations, they will largely be left with no one else willing to mitigate risks, ignore PR pitfalls and navigate financials and banking issues.
Savvy Chinese investors also know that with all other risky regions, it is one’s personal relations that protect one’s investment. Sure, laws are on the books, but what really counts is who you know. (This is, of course, how much of the world works.)
From a Chinese perspective, what is really unfortunate about the Jang Song Taek affair is that the purge appears so complete and permanent: it is unlikely that he will escape with most of his business interests intact. Furthermore, the indictment carried in North Korean media noted in particular that he committed “such act of treachery as selling off precious resources of the country at cheap prices.”
This could mean that all Jang-related projects are up for renegotiation. What must his Chinese business partners be doing this week? What of small-time investors? To whom are they placing phone calls? Who is explaining everything will be OK? (This report suggests an awareness that investor jitters need to be addressed.)
For a Chinese investor – or someone considering investment – the message of this past week is that it doesn’t matter how high up your interlocutor is. Jang was widely seen as a “China Man” and if even the country’s no. 2 is not powerful enough to protect your economic interests, then who is? Everything is vulnerable. This bodes poorly for some businesspeople already on the ground, but even worse for institutions such as the Joint Venture and Investment Commission and the new Economic Cooperation Bureau, who will face a more reluctant pool of potential Chinese investors.