North Korea is the most isolated country on earth, but that doesn’t mean you can’t get a piece of the action in the Democratic People’s Republic of Korea. Whether you’re betting long or betting short on NoKo, there’s money to be made there — if you know how this unusual market works.
Here are 5 ways to make money from North Korea.
1. Invest in North Korea’s film industry.
Even North Korea has a Hollywood. And it’s never looked better. Besides the films that the government produces — stories about evil American imperialists, the joys of life in the hermit kingdom, that sort of thing — more and more directors are now shooting films inside the DPRK and releasing them internationally.
Comrade Kim Goes Flying, a new romantic comedy about a North Korean coal miner whose dream of becoming a trapeze artist is crushed by her arrogant co-star, recently enjoyed some nice accolades on the festival circuit. This might be the start of a real North Korean film market.
Comrade Kim goes Flying is the heartwarming story of trying to make the impossible possible. Much like Korean economics.
Strategy: Watch the results of major film festivals (including Busan, Toronto and — yes — the Pyongyang International Film Festival) to see which DPRK flicks are picking up awards and locking down distribution deals. Why not bankroll a North Korean film or buy the distribution rights to a hot new property in Pyongyang? It’s just a matter of time before Kim Jong Un gives you a star on the Youth Hero Highway.
2. Buy shares of companies operating in North Korea.
North Korea is in the middle of a boom of sorts. The Great Leader Kim Il Sung’s 100th birthday kicked off a massive construction effort, which was fuelled by ongoing investments from Russia and China (and spurred on by that whole rivalry with the South thing). Housing projects, long roads, manufacturing facilities and cellular towers are popping up all over the country.
A few bold foreign companies have picked up the contracts. Egyptian juggernaut Orascom built Koryolink, North Korea’s mobile network, and later funded the completion of the infamous Ryugyong Hotel. The German Deutsche Post DHL handles logistics and delivers packages to Pyongyang. And the French Lafarge owns half of Sangwon Cement, which operates a cement plant near Pyongyang (and which ended up in LG’s hands through its acquisition of — wait for it — Orascom’s cement division). Dozens of other companies, many of them Chinese, have also struck lucrative joint ventures with the regime.
Strategy: Orascom, DHL and Lafarge are publicly traded. Why not pick up a few shares of these ambitious, diversified companies? If you have your sights on Orascom but are feeling a little Egypt-shy (revolutions and all that — I get it), the Egyptian giant is also listed on European exchanges. Sometimes it’s best to invest in one dictatorship without getting involved in another.
3. Get into the mining game.
North Korea is sitting on an estimated $4-$6 trillion in natural resources. That is the regime’s greatest asset, and it’s partly why the DPRK carries so much weight in the region (besides the whole nuclear weapons thing). Someone has to extract those minerals from the ground, and the truth is that Pyongyang can’t do it alone.
Enter the Chinese. They have almost exclusive dibs on mining contracts (41% of Chinese joint ventures in the DPRK are in extractive industries), which are usually operated as JVs with the Koreans (there’s no “I” in “rare earths”). China is especially interested in North Korea’s molybdenum, a critical ingredient in steel, says Victor Cha. And China uses a lot of steel.
Strategy: Consider picking up some Chinese mining, construction and raw-materials equities, or scope out manufacturing companies that benefit from cheap steel. If they source materials from the DPRK, they might have a serious cost advantage. Just make sure you check the Foreign Earned Income box in TurboTax when you start dabbling in Korean rare earths.
4. Teach English in Pyongyang.
The DPRK is hungry for English teachers (American imperialists need not apply). If you speak English, hold a passport from a friendly(ish) country and are willing to spend a few months in Pyongyang’s empty streets, consider a post at Kim Il Sung University or a North Korean middle school. The ability to communicate in the aggressors’ native tongue is a major asset in the DPRK.
Strategy: Teaching is a lonely profession. Teaching English in the world’s most isolated regime is downright alienating. Double-down on your Korean skills, download a few hundred e-books and movies to keep you company (yes, you can bring your iPad into the country), and prepare for a strange few months. But then, you’re doing it for the children.
5. Buy up North Korean debt.
North Korea operates under crushing debt, estimated at roughly $20 billion, or ~60% of its meager GDP. Which would be a problem for most governments, but not this one: North Korea has tried in the past to repay its creditors with ginseng root and sushi, asked them to forgive its loans outright, or simplyrefused to service its debt altogether. (And by “service” I mean “pay it back.”)
That’s bad news for DPRK loan underwriters, but great news for clever investors (especially ones looking to reallocate their portfolios). A bunch of bonds that North Korea defaulted on in the 1970s, for example, can be bought for pennies on the dollar. Small swings in the price of the bonds can net you a tidy little profit just for handling the regime’s sketchy paper.
Strategy: Keep an eye on the prospect of reunification of North and South Korea. If the peninsula reunifies, South Korea will almost certainly assume the debt obligations of its northern half. When it does, whoever’s holding DPRK paper will be made whole by one of the most powerful, reliable economies in the world.
And there you have it: 5 ways to jump into North Korea. Just because the DPRK is a closed regime doesn’t mean it’s closed for business — at least not if you know where to play.
N.B. to our loyal and trusting readers: Your humble correspondents at The North Korea Blog do not advocate any particular investments. We are not financial advisors, DPRK-focused film producers, traders, underwriters, extractive joint-venture operators, or third-world English teachers. If it sounds like we are, it’s only because we do our homework. So should you.
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