Q&A: Choson Exchange's Geoffrey See

Q: What is the premise of Choson Exchange?

A: We are a non-profit based out of Singapore and Vietnam. We train North Koreans in economic policy, entrepreneurship, and business, so the aim is to have them transition the economy. We fly in and fly out. We have a team of 12 that used to be full time but now we’re part time. The team goes in 4-5 times a year. I used to go about 5-8 times a year, but now I generally go once a year and meet our North Korean partners twice a year outside the country. I’ve been there a total of 40 times. We run programs in policy and infrastructure, general business and economics. The last one we started was in 2015 and is a more start-up focused program. 

Q: How did you establish an incubator?

A: In 2014, the North Korean government wrote up an economic zone policy and we had a lot of local administrators involved in that attend our workshops. They were very open minded, problem-oriented, and not overly ideological. The zone team we picked to work with had no expectations of large-scale foreign investment. They were willing to do something small, experiment and learn from it. We took two batches of people to see co-working spaces and incubators in Singapore and Malaysia. After that, they went back and started the first incubator in North Korea. At the end of every cycle, we bring in foreign professionals for what we call the Pyongsong Startup Festival and basically do a mini demo day. Pyongsong is a city north of Pyongyang. 

Q: What has been the progress so far?

A: They’ve been running a six-month program annually from 2015, so this year will be our fourth iteration. Each program trains about 100 people, normally across 18-20 teams. Out of those teams, about 14 go out and actually try to build a business in the country. To date, they’ve established five teams in the economic zone, and one of them has hired about 50 people. There are others outside the zone, but we don’t have as much visibility on the scale of their operations. I would say about 60% of the companies go into operation. 

Q: What challenges do you face?

A: An accelerator in North Korea is very different from one in Seoul or Singapore, where you have most of the building blocks – start-ups, institutions and infrastructure – and it’s a much simpler process. In North Korea, the objective is not just to help the start-ups figure out how to get an idea off the ground and do it well; we also want it to inform the institutions in the country with a feedback loop. Local entrepreneurs find a way of educating policymakers and let them know about the problems businesses face. For example, when we first came in, everybody said registering a business was a simple process that takes two weeks. But when they started doing it, they realized it takes six months or more.  

Q: What is it like working with the local authorities?

A: It was a challenge to get people to accept the idea of what we were teaching, which to them was a very sensitive topic, and to some extent, it’s still sensitive today. Regulation-wise, it’s very challenging for a businessperson to set up a business and get all the permissions from the government. And the property rights are not very well enforced. There is still not an equity law in place, so in theory, people do not own the companies in their individual names. That creates a lot of incentive issues. When we established this program, part of the aim was to help them understand these issues and why it’s important that they need to fix all this soft infrastructure.

Q: Is the plan to ready the country for eventual foreign investment?

A: I don’t think that’s feasible at this stage because of sanctions. Maybe except for China, we are not going to get a lot of foreign investment. Entrepreneurs in North Korea have to go find friends and family for funding, and we’re not very involved with that part. They have to figure that out for themselves. Initially, it was our aim to tackle that, but then when tensions started ramping up, we couldn’t do a lot about it. The situation may be improving now because, since last year, there’s been a lot more Chinese involvement in the economy. 

Q: Is Chinese investment a realistic possibility?

A: We’ve not interacted a lot with Chinese investors, but I think what we have noticed in the last year is that there’s a huge increase in Chinese businesses in North Korea. Clearly, China has more leeway to do things than other countries, but then there are still active sanctions in place. So, there are a lot more visits and delegations, but I don’t think there is a clear permission from the Chinese government for businesses to invest. People are doing the groundwork, but I’m not sure they’re actually pushing ahead with projects.

Q: How do politics impact planning?

A: We have more of a direction than a plan. Planning in this environment is impossible due to all the tensions. We started out as a volunteer organization and we’ve kind of returned to those roots, where we have people coming in with us and contributing part of the cost. We used to have some institutional funding but most of that disappeared in 2016 after the nuclear tests happened. We always want to scale up the program and those plans are still on the drawing board. But the fact that there are a lot of external restrictions such as sanctions that limit what we can do means that at this point, we just want to maintain a baseline of activity and keep the channels of communications going. 

Q: What happens when there is a spike in the tensions?

A: Everything changes. In the early days, we used to have these crazy periods where suddenly they would declare a [military] mobilization and things would get very tense. We had to fight with our partners to make sure the program continued and emphasize that you cannot just cancel programs when there’s a change in politics. When tensions rise, resources go through the floor. We need to make sure our work is sanctions-compliant, which costs us a lot. And the cost keeps going up every year because there are more sanctions and it’s more complicated. Banks are less willing to touch any NGO [non-governmental organization] that goes anywhere near North Korea, even if it’s sanctions-compliant. Most recently, the US issued a removal of its visa waver for anyone who has visited North Korea, so the people willing to work with us on workshops, those numbers are probably going to take a big hit too. 

Q: What is your ultimate vision for North Korea?

A: I believe that for North Korea to integrate into the region peacefully, it needs to change its economic approach and structure. And I think a big part of that is things like property rights and putting in the right institutions for a functioning economy. We’re very careful with “capitalism” and “market economy.” We do not refer to our program in those terms. But we say that there needs to be at least a viable economic model. And that will involve some form of a market system. How exactly they will implement it, that’s for them to decide. But we want to encourage them by saying these are the things you need to grow, to develop entrepreneurship and to interact with the rest of the world.

Q: Could technology speed up this process?

A: One of our workshop leaders had experience setting up a digital bank in his home country of Myanmar, and he said it was a huge advantage over the state-owned banks there, which have a lot of capital and branch networks. He needed to find a way to catch up very quickly, and I think North Korea faces the same thing. I believe strongly that technology can help solve a lot of problems and connect North Korea with the rest of the world. And I think there would be a lot of different use-cases. In the long run, when hopefully relations with the US, South Korea and Japan are better, there’s a lot of potential in North Korea. It will need a lot to realize that potential, but it’s an interesting place, and the bottom line is that entrepreneurship does exist today. People are experimenting and building interesting companies.

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• Topics
• North Asia
• Early-stage
• South Korea
• Impact investment
• Economy
• seed