Chinese firms gamble on North Korea investment
Staff Reporter 2013-04-23 12:09
A Korean singer performs at a restaurant near the North Korean border in Jilin province. (Photo/CFP)
North Korea's efforts to woo Chinese investors, spearheaded by the country's investment office in Beijing, have grown more fervent since Kim Jong-un took over from his late father at the end of 2011, reports Hong Kong's Phoenix Weekly.
The Investment & Development Group, controlled by Jang Song-thaek, vice chairman of the National Defense Commission and uncle to Kim Jong-un, organized a high-profile economic forum in July last year to promote business opportunities in the country.
The group subsequently announced alongside China Overseas Investment, the establishment of a 3 billion yuan (US$480 million) fund for investment projects in North Korea.
The fund, sponsored by Chinese business groups and venture capital firms, will invest in North Korea's mining industry, real estate, and port operations, said the Phoenix Weekly, citing news reports.
Currently, the Investment & Development Group is soliciting Chinese investment for over 20 projects, including 17 in the field of mining, and others in the infrastructure, processing and service industries.
According to data compiled by China's Ministry of Commerce, by the end of 2010 more than 200 Chinese companies had invested approximately US$290 million in North Korea, mainly in the mining industry. But there are few reports of successes among these investments, with several mining projects having been terminated due to accidents and business disputes.
An industry expert said that Pyongyang is secretive about its mineral ore deposits and prohibited Chinese experts from inspecting locations, leaving them with no way to estimate the risk of the projects before investing.
Zhang Liangui, a professor at the Central Party School in Beijing, said most investments in North Korea required large funds and took time to generate returns. He said a 30-year investment contract would not yield any returns in the first ten years because of the country's poor infrastructure. Investors would have to build railways, highways, power lines and even power stations on their own, and it was uncertain whether the ores they mined would receive the green light from authorities to allow transport to China.
Lin Jinshu, a professor at Yanbian University in the Jilin city of Yanji, a busy hub of transport and trade between the two countries, added that the majority of Chinese companies that had traded across the border in the 1990s had become bankrupt due to their North Korean counterparts failing to fulfill their side of the contract.
Many Chinese entrepreneurs believe North Korea will eventually open its doors to the outside world, just as China did in the late 1970s. They are eager to enter North Korea, despite the fact that their investments are not expected to yield profits any time soon, reports Phoenix Weekly.
