Korean Startups Should Plan to Enter the North Korean Market

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 open up the North Korean market to the world.

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. However last year’s agreement seems a lot more promising. The signing was done on South Korean soil. This was the first time a North Korean leader stepped foot onto South Korea.  Reunification seems more possible than ever.  

What Will Start to Happen?

The first thing we should start to see as 2019 continues is the slow reduction of military assets on both sides along the border between North Korea and South Korea. Once that happens we should see is more back and forth travel between the two countries. South Koreans will be able to travel to North Korea a lot easier, as well as, North Koreans will be able to travel to South Korea.  These will be the first steps towards reunification.  

The Potential of the North Korean Market

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 when it comes to 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 for their product or services to be implemented in North Korea which could be a decade or so behind in regards to technology infrastructure.

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 be players as well 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 a certainty that a peace agreement will be reached soon. However, the potential outweighs the time spent in slowly looking to position themselves to enter the Korean market. Every Korean startup should at least keep an open mind into 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 would be able to 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 Koreans 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 are over $10 trillion worth of mineral deposits in North Korea which 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 their 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 required by bigger companies.  

Were South Korea and North Korea to unify, North Korea will be aggressive in their 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

Currently, the United States and North Korea are not progressing as much as North Korea and South Korea. What the United States wants is one thing. Denuclearization. This is also something China 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 between peace is reached at some point.

A compromise that would satisfy the United States, China, South Korea, and North Korea seems possible now. 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 will be the perfect middleman between business deals with North Korea and the world, moving forward.