Can Korean Startups Enter the North Korean Market

Back in 2018, North Korean dictator Kim Jong-un signed the Panmunjom Declaration with South Korean President Moon Jae-in in South Korea. The declaration was to have both countries cooperate on officially ending the Korean War. Therefore, beginning a new area of peace and improving inter-Korean relations, and opening up the North Korean market to the world. There was great hope that unification was a real possibility. 

These agreements have been reached before. They have fallen apart in the past, as was in the case in 2007 with Kim Jong-un’s father Kim Jong-il. President Moon’s agreement seemed a lot more promising. The signing was done on South Korean soil. This was the first time a North Korean leader stepped foot in South Korea.  However, as new South Korean president Yoon Suk-yeol starts his term. Things look like they are back to square one. 

President Yoon Suk-yeol has made it clear that South Korea’s military will respond to any missile provocations by North Korea with clear retaliation. 

What Will Start to Happen?

There was a theory out there that the impact of COVID-19 has been brutal for North Korea. Cases of COVID-19 have not been reported from North Korea; however, North Korea may be having real problems dealing with the virus even in 2023. Therefore, it is not out of the question that, at some point, North Korea will look to South Korea for help in dealing with the pandemic. However, that has so far not been the case as North Korea has stepped up its rhetoric. 

It is highly unlikely that unification will happen anytime soon. There are no signs of the reduction of military assets on both sides along the border between North Korea and South Korea.

The Potential of the North Korean Market

North Korea has a population of 25 million. They have an estimated $28 billion in GDP. Not much is known about North Korea, which intrigues a lot of potential investors in Asia. Especially in the travel industry, for example, Korean Airlines will benefit greatly from the increased travel to and from North Korea. Infrastructure demand for this would reach $3 trillion by 2030. Furthermore, Korean Startups will be able to be the first to market their product or services to be implemented in North Korea. However, the infrastructure in North Korea could be a decade or so behind South Korea.

North Korea’s tech ecosystem will need to be upgraded quickly to keep up with Asia. This is where there will be high demand for Korean startups to help them with the process. Korean enterprises will also be players, but their process will be slow and drawn out. Korean startups can start right away, which will give them a huge advantage. At first, Korean travel startups will be in high demand, but all other sectors will soon follow.

The real question is whether to send a lot of resources preparing to enter North Korea when it is not certain that a peace agreement will be reached soon. However, the potential outweighs the time spent slowly looking to position themselves to enter the Korean market. Every Korean startup should at least keep an open mind about expanding into North Korea within the next couple of years.

How Korean Chaebols Can Capitalize

Reunification would be huge for Korean conglomerates. Companies like Samsung and LG could hire millions of Korean-speaking workers for very low salaries. There will also be a huge market for their products and services. The interesting part will be that most of the old products and services, which is pretty much obsolete in South Korea, will be in high demand in the North. It will almost be like turning back the clock 20 years and starting over for most of these conglomerates. This could be terrible news for the average working-age South Korean as there will be a lot of jobs, especially in manufacturing, going to the North.  

The average worker in North Korea currently takes home around $200 a month. Therefore it is no wonder that most North Koreans are undernourished. Even a low monthly wage of $1,000 a month which would be unheard of for South Koreans, can drastically improve the lives of many North Koreans. In addition, it is estimated that there is over $10 trillion worth of mineral deposits in North Korea that have not yet been mined. These minerals include gold, iron, copper, and graphite. These minerals are crucial in the production of smartphones. It is in the best interest of electronics companies like Samsung and LG to establish a mining company in North Korea.  

How Korean Startups can Capitalize

Korean startups could be positioned to be the gateway to North Korea. There will be a lot of Asian and Western companies looking to find a way in and could start reaching out to the Korean Startup Ecosystem to find the right partner. North Korea will need a lot of help with its infrastructure and quality of life to bring it up to South Korean levels. The quickest movers into North Korea will be Korean startups. They will not have to deal with all the red tape bigger companies require.  

Were South Korea and North Korea to unify, North Korea would be aggressive in its effects to leverage digital technologies. North Korea will have an advantage in being in close proximity to China, Japan, and South Korea. Since North Korea is largely undeveloped, it will have the ability to experiment with new technologies. Testing new technologies in manufacturing and urban services will be possible by partnering with Korean startups.  

Korean ed-tech startups can help improve North Korea’s primary and vocational education system. The North Korean government will be very active in major upgrades in education to equip the workforce for the future.  

Challenges Remain in 2023

Currently, the United States and North Korea are not progressing. The same goes for South Korea and North Korea. What the United States wants is one thing. Denuclearization. This is also something China also wants. However, China does not like the idea of North Korea becoming too westernized and under the influence of South Korea and the United States. This is because North Korea is an ally of China and acts as a buffer between South Korea and the United States. However, it seems more of a matter of time before peace is reached at some point.

A compromise that would satisfy the United States, China, South Korea, and North Korea seems, at this point, years away. A peace treaty would be a game-changer in Asia and bring a new player into the game that everyone will try and befriend. South Korea could the perfect middleman between business deals with North Korea and the world moving forward.