What It’s Like Having A Startup In North Korea
North Korea is not exactly known for its open approach to innovation. A centralised economy and tight social control mean that little can grow in the country. Despite this, entrepreneurship is flourishing in one of the most backward nations in the world. Believe it or not, a territory just north of Pyongyang has even been dubbed North Korea’s Silicon Valley.
The Institute for Peace and Unification Studies in Seoul National University claims that North Korea relies on economic activities rather than state rations for over 80% of their household income. Since the early 2000’s private markets have been progressively liberalised and urban markets are regularly held.
Flash forward to 2016 and North Korea even held its first startup fair. Held in a University Auditorium, six foreign professors assisted the event to run seminars for students who made products out of modelling clay and practised their presentation style. After attending, Jukka-Pekka Heikkilä of Helsinki’s Aalto School of Business claimed that a “real” start-up fair will be possible only after significant changes in the country’s legislation and business climate.
Despite having a bad press, Kim Jong-un is the first North Korean leader to implement market-oriented reforms. In fact, sources claim that it is thanks to this boom that the nation has recovered from the famine affecting them since the early 1990s. This is largely thanks to his agricultural reform which allows individual families cultivate previously state-owned fields.
What Is Holding Startups Back?
The main limitation of the system is that North Korea only tolerates entrepreneurship that does not threaten the status quo. Many of the present enterprises are joint ventures with the government or are operated by foreigners with special authorisation and limited control. The centralised system requires everything to be approved by the state meaning that even processes like employment and scaling up require government intervention. The only loans present are also state given, meaning that businesses are also financially dependent on the nation’s support. As a consequence, there is little opportunity for businesses to actually scale up.
Major holdbacks are also present in tech entrepreneurship as connectivity is lacking, meaning that people are not able to see their competition and often pitch products that already exist.
North Korea’s Silicon Valley
The Unjong technology zone is where North Korea’s startup scene is mainly concentrated. The nations ‘hybrid’ socialist system means that the government owns most of the tech startups. This zone is divided into information technology, biological technology and other sectors such as engineering technology. Locals have claimed that individuals with startup ideas report them to the government who helps them build the business in the area. However, most private businesses in North Korea are foreign owned and collaborate with the government. Here are some recent foreign-local joint ventures that have entered the country.
Three Swedish advertising professionals opened up the first jeans company exporting to North Korea. To open the export deal all they did was email the government who approved the business. Although this venture only lasted from 2009 to 2011, it was a significant step as it was the first country to import jeans to North Korea.
Nosotek, also known as The Number One Software Technology, is the first Western and North Korean IT joint venture. It is known for creating computer games such as Pyongyang Racer, a racing video game developed to promote tourism.
Although not your typical venture deals, North Korea does have a business scene at an embryonic level. So can businesses grow if economic liberalisation is not accompanied by equal political freedoms? Do the two phenomena necessarily need to work together to create a prosperous nation?
Let us know in the comments!