By Jeff Baron
11 March 2013
A CAPITALIST IN NORTH KOREA: My seven years in the Hermit Kingdom, by Felix Abt.
Amazon Digital Services, Inc., 2012. ISBN (ePub Edition): 978-1-937572-92-1.
A CAPITALIST IN NORTH KOREA is Swiss entrepreneur Felix Abt’s account of his work and life in the DPRK, 2002-2009. As Jim Hoare did in North Korea in the 21st Century, Abt draws from a trove of personal experience to create a vivid account of the people and place. Along the way, Abt addresses big questions such as economic reform and practical ones such as how to use e-commerce to achieve brand recognition in North Korea. I’ve excerpted freely from Abt’s extraordinary story both to give a sense of his book and to pass along some of what he saw and learned.
Abt went to the DPRK in 2002 as resident representative for the Swiss power equipment-manufacturing conglomerate ABB, a $40 billion a year multinational. When his relationship with ABB ended in 2005, Abt stayed on to represent other European multinationals. He also became managing director of a joint venture with a North Korean pharmaceutical manufacturing and distribution company, co-founded the European Business Association in Pyongyang, and started the Pyongyang Business School to develop “market skills in the next generation of leaders.”
Abt had worked for multinationals such as Hoffman-La Roche, the Swiss pharmaceutical and medical supply manufacturer, in Europe, Africa and Asia, including as country director, before going to North Korea. Perhaps because of his experience in developing countries, he shows a willingness to consider the realities in the North—its problems and opportunities—rather than base his judgment on all the international lists that so reliably put the country at the bottom, from investment climate to human rights.
The author’s account of his experience as resident managing director of PyongSu Pharmaceuticals, a joint venture between European investors and a North Korean partner, is the most unexpected part of the book. Abt writes that when he joined Pyongsu in 2005, he immediately saw the need to devise marketing strategies to compete against products from State-owned drug makers priced much lower but of uncertain quality.
PyongSu’s market research—that meant hiring sales staff to visit drug stores, doctors offices and hospitals, to see who was buying what, why, and how much they were willing to pay—indicated pent-up demand from wealthier consumers in Pyongyang and also in the provinces. The joint venture had already learned to concentrate sales efforts on doctors’ offices and pharmacies, and not on the state-owned hospitals, because the authorities would see that as a challenge by the privately run pharmaceutical firm to the socialist health system. As such, PyongSu devised a strategy to spark demand for its products, both manufactured domestically and imported, from prospective customers. He explains:
We were looking for somebody who could give fair, competent medical advice, in response to questions from readers, on our company’s website. The country’s intranet was then accessible to households throughout the country, rather than merely government agencies, state companies and universities.
In response to this need, Abt interviewed and hired a recent medical school graduate, Dr. Song.
In 2007, we began our online medical advice service, receiving one or two emails a day. Dr. Song was also a talented medical writer. She put together terse, understandable articles with tables and illustrations on our website. Her efforts paid off for all of us: after a few weeks, the number of incoming emails started to explode from North Koreans looking for health-care wisdom. Dr. Song’s working days became longer and longer, but this relentless physician didn’t complain. She must have, after all, become one of the country’s most popular doctors, building our reputation as a competent pharmaceutical company. Not surprisingly, the first orders of pharmaceuticals from remote provinces reached us a few weeks later after her public image took off.
Observers of the North often wonder about access to computers in households and offices, and how connected those computers are to each other. Abt’s is the first account of e-commerce in the DPRK I’ve seen. He gives us more clues about how widespread computer use is in North Korea, when he writes about stocking-stuffers for prospective business partners:
At the beginning of my stay in North Korea, I offered nice gifts, such as a pair of fine leather shoes, a bottle of Scotch whisky or a large box of Dunhill cigarette packs for the men. For the ladies, I handed over a beautiful silk scarf, a brand-name perfume or a piece of jewelry. But when people became so keen on getting a USB to watch foreign movies, I stopped offering expensive presents and gave them those tiny electronics.
Having informed us North Koreans use computers for marketing, medical advice and entertainment, Abt turns to military applications, too:
I once asked Professor Kim, a leading IT expert at the respected Kim Chaek University of Technology, what future role information technologies would play in national defense. He answered that wars without a cyber element are increasingly unthinkable, the internet would not be spared from battle. North Korea, he added, would build up the needed IT capabilities to make its enemies pay dearly for their aggressions.
While at Pyongsu, Abt worked in light manufacturing and marketing; his work representing ABB and mining equipment manufacturers gave him experience with heavy industry. That work took him to power plants, factories and mines around the country. He observed both industrial infrastructure and the workforce:
The lack of electrical power is the largest bottleneck to any industrial development of North Korea. I have visited provincial factories far from the capital, where workers sleep in the factory at night so they can wait for sudden electrical bursts. When the power came back and the lights went on, the workers jumped to their feet to operate the machines for a couple of hours until the next blackout.
The North Koreans, like their southern brethren, were hard workers—and it showed. Laborers sometimes stayed overnight and worked weekends without resting, sometimes even for weeks if an urgent project needed to be finished. Workers didn’t complain around us about long working hours. I observed this in my North Korean business partners as well as in the factory I was running myself.
When Abt took visiting ABB power station experts to a hydro construction site, he says they “were amazed and called it an engineering masterpiece.”
Most foreigners in the DPRK feel their interactions with North Koreans are carefully structured to minimize contact beyond what’s necessary to get their work done. Abt describes this aspect of life there:
Given the realities of the closed socialist system, most foreign managers were kept in a bubble, making it difficult to meet directly with North Korean customers, suppliers and authorities.
But, he writes, “I got lucky, because the state allowed me regular access to local businesspeople and customers.” Abt parlayed that “luck” into building relationships with Pyongyang hospital directors, drug wholesalers and pharmacy managers. And as he built his personal relationships, he built his business. Abt offers a primer on how to get “lucky” in the DPRK:
Part of my success owed to my willingness to work with local people, rather than pass judgment and get involved in politics. I built up a large network of contacts who helped shape our business for the socialist economy. Compare this approach to that of my predecessor, a close friend of the British ambassador, who was a staunch advocate of regime change. He didn’t get access, of course. While I could name off-hand the family background of my staff, he did not even know who the party secretary at PyongSu was—and a good relationship with that gate-keeping official is key to success.
Abt gives the reader a sense of what it’s like to live in Pyongyang as a foreigner. In one revealing anecdote, he tells us that late at night in Pyongyang, traffic police (and for James Church, traffic ladies, too!) wave down passing cars for a ride home at their shift’s end. One night, a policeman stopped Abt’s car in the dark, jumped in without looking at the driver, and as Apt took off, was horrified to see he was with a foreigner. The policeman picked a deserted spot to jump out, but Apt can’t be sure the incident hadn’t been observed—which would have reinforced suspicions about foreigners generally that he was a spy. Apt decided to tell his office the next day about the incident.
My staff quieted down and looked serious when I talked to them. A case as serious as this had to be reported by them to the government. I repeatedly asked them in the coming days if they had heard something about this case, knowing they could tap into their contacts in the police. After some days, I was told that the policeman could continue his work but that he would certainly be more careful in the future when stopping cars. It’s highly likely that he underwent some very unpleasant scrutiny and self-criticism sessions.
The capitalist who went to Pyongyang to make his living was affected personally by the currents in economic policy in the 1990s and 2000s, and his treatment of the various institutions and personalities at play is particularly interesting. Abt recounts a message given him of the wrong path taken:
After a meeting in early 2005 with one of North Korea’s largest business groups, the vice chairman walked me to my car and lowered his voice. “Lengthy discussions on the course of the economy took place at higher echelons of our party in the recent past,” he whispered, “and the old conservative guard asserted itself this time. Business people just need to be more patient now.” Obviously, he was aware that there was a period to come that would make business life tougher for everybody. But he was optimistic that this was a passing phase: the course of the economy was, surely and predictably, going to change again later. And the change was set in motion, after the “old guard” became too zealous in its ruinous currency reform.
Minds are often pre-set when it comes to North Korea. There’s little varnish in Abt’s book, and passages in turn will irritate virtually every reader of every nationality in every mindset on the subject on the DPRK. That’s a good thing. The conclusions of this Swiss capitalist who chose to make a living in the North offer a better way forward for the U.S. and for the DPRK, but involve choices that, much like other parts of this excellent book, neither are likely to find very palatable:
Pyongyang is not a mafia state, and cornering a country is ethically more questionable than engagement. Foreigners engaging with North Koreans are change agents. The North Koreans are confronted with new ideas which they will observe and test, reject or adopt. As the French economist and writer Frédéric Bastiat once said: “When goods do not cross borders, armies will.”
In the mid- to long-term, the DPRK cannot survive without true economic reforms, and the party knows this. If it refuses them, it will collapse as badly as the socialist countries in Eastern Europe did two decades earlier.
While many outsiders may see the country as “stuck,” A CAPITALIST IN NORTH KOREA depicts a society in motion—changes in gender relations, values between generations, government functions such as the public distribution system, attitudes toward foreigners and foreign investment, relations with China, practices and policies in agriculture, how markets operate, how people find their housing, how companies find their offices, and how people find their jobs.
Abt’s story will fascinate generalists and specialists alike. Photographs he took around the country appear throughout to show the North’s glitter and grit, and his narrative takes us where the shutter cannot. If understanding the DPRK factors into your job description in any way, and you haven’t spent seven years recently on the ground there trying to figure the place out so you can make a euro, A Capitalist in North Korea is a must-read.
 Abt explained that the state in 2006 had closed a Chinese-run pharmacy which had located itself right in the entrance to a state-owned hospital. He took this as a warning from the authorities not to compete directly against state enterprises.