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Samsung's Chief Is To Visit North Korea – Most Likely Not For Business Opportunities


09/18/2018


Samsung's Chief Is To Visit North Korea – Most Likely Not For Business Opportunities
The chief of the largest smartphone maker of the world – Samsung, is set to accompany South Korean President Moon Jae-in to North Korea.  
 
An ambitious plan for South Korea to connect to the rest of the Asian continent through a land corridor over North Korea was laid down last month by Moon which, according to him, would dramatically transform and connect the economies of South and North Korea. This will immensely increase opportunities for trade with lucrative markets using the land link.
 
If this plan takes shape, South Korean companies and family-run conglomerates such as Samsung would be benefited.
 
"If South Korea can take the initiative to bring chaebol leaders to North Korea ... maybe it would be a good start for South Korean [money] to move into Pyongyang," said Steve Chung, a Korea expert at the Chinese University of Hong Kong.
 
However, many doubt whether Samsung would set up shop in North Korea in the near future.
 
SK Kim, an analyst with Daiwa Capital Markets said that Jay Y. Lee, Samsung's billionaire chief, and other business leaders are accompanying the South Korean delegation more because of a sense of obligation towards the government rather than seeking any business opportunity in North Korea.
 
Kim said that the South Korean government has been forcing conglomerates such as Samsung to enhance their corporate governance and clean up their acts. This is the reason that the likes of Lee could not deny the call for joining the delegation to North Korea by Moon.
 
Kim said were levelled against Lee and got released from prison after the reduction of the sentence.
 
A spokesman for the South Korean president's office said that the South Korean delegation is slated to meet the North Korean Vice Premier Ri Ryong Nam. No agenda for the meeting was however provided by the spokesperson.
 
A similar delegation of business leaders from South Korea gad visited North Korea on two earlier occasions in 2000 and 2007m said the spokesman.
 
There were no comments from Samsung.
 
According to analysts, foreign investors would be interested in the North Korean market which has a population of 25 million. The attractiveness of the market includes a cheap workforce, strategic geographic location and abundance of natural resources that are yet to be exploited.
 
For the purpose of examining of the potential investment opportunities and possibilities in North Korea, Samsung had announced the setting up of a research team from Samsung Securities, the investment arm of Samsung,  in June,  
 
But the risks for doing business in North Korea are huge – including the sanctions that have been imposed on the country by the US and the United Nations. Companies would have to bear the consequences unless the sanctions are lifted.  
 
North Korean economy has been significantly impacted by the sanctions with its economy shrinking by 3.5 per cent in 2017 accoridng to a report by South Korea's central bank earlier this year.
 
Kim, the Daiwa analyst says that there is a very low chance that any business opportunity would come up for Samsung during this North Korean visit because of the economic plight of the country.
 
(Adapted from MoneyCNN.com)