Business In North Korea More Difficult Than Ever, Even For China

Doing business with a country like North Korea can’t be easy, and it's getting harder -- even for longtime political ally China. The neighboring nation has been the North’s biggest business partner for some time, a relationship that Pyongyang relied on heavily for hard currency, investment and other necessities. But ever since the North’s leader Kim Jong Un took the helm in 2011, relations between the two nations have taken a hit, and it’s affecting business.

In a research paper, John Langdon, a student at Johns Hopkins School of Advanced International Studies, exposed the complications that four different Chinese firms ran into when trying to work with their northeastern neighbors. The companies, which span different sectors, exporting cement, iron ore, pressure vessels and hydroelectric generators, explained that doing business with North Korea is increasingly impossible.

Complaints from the companies included having to deal with North Korea’s inadequate physical infrastructure, “arbitrary and capricious” changes in contracts and regulations, and constant bribery. The Chinese state-owned enterprise involved in exporting pressure vessels to a military-affiliated North Korean counterpart faced a lot of the aforementioned issues, and eventually the trade relationship was terminated. At least three of the companies studied faced issues of infringement on personal freedom, with reports of Chinese engineers being shuttled around in windowless trucks while in North Korea, as well as being strictly confined to the worksite or their temporary residences.

The company dealing with hydroelectric generators used North Korean translators to help out, and found that they would “take sides” providing lopsided negotiations for the business. Chinese workers say they were restricted to only limited interactions with their North Korean counterparts and even found listening devices in their residences.

China’s economic relationship with North Korea has been hurting ever since last year, after Pyongyang’s series of nuclear threats and third nuclear test in February. South Korean news agency Yonhap reported that trade between the two countries fell 6 percent in the first six months of 2013 compared to the year before. As China is the North’s biggest trade partner, 6 percent means a lot. Looking forward, it’s unclear if relations will rebound to what they used to be, but the outlook seems grim. The high-profile purge from office and execution of Jang Song Thaek, Kim Jong Un’s uncle, also took out a key China expert. Jang had been a known champion of Chinese-style economics in North Korea and was instrumental in trade relations between the two.