A Capitalist in North Korea

by Felix Abt

  In the end, the parents decided to send them to the Russian school at the Russian embassy. For them, that was a safer bet. Half a century has passed already since the Soviet Russians decided not to worship their “Dear Father Stalin” any longer, and to abandon any form of personality cult.

  My daughter plays in a ball house at the Kindergarten of the Korea International School in Pyongyang, with her Korean teacher patiently watching.

  University students frequently study Juche and Songun, but the ideological erudition doesn’t end there. Every Saturday, my staff studied these subjects in the office like all other adults in North Korea. It was common to come to the office on Saturdays to do political studying and training, but also to do the work that needed to be finished by the end of the week. “What’s the study topic right now?” I once asked one of my staff. “It’s about Juche. We are preparing for an exam on this. I like it,” she smiled and sounded enthusiastic and authentic. The trade union cells and the party cells in the company were responsible to hold regular sessions for our staff, including exams.

  All kids are members of the Pioneers, a party-led movement. They are required to join the organization in elementary school and remain there until their early teenage years. Like in many socialist countries, the movement’s leaders try to make the children revolutionaries who are completely faithful with the Juche values they are being taught at school.

  On important occasions, like the birthdays of the leaders, I saw groups of young pioneers wearing red kerchiefs around their necks, bowing in front of murals of Kim Il Sung and Kim Jong Il. After their paying their respects, they laid flowers in front of the murals. However, I also watched pioneers roaming the streets behaving like kids anywhere else in the world—playing around and causing child-like mischief.

  Talented children enchant visitors by performing Korean and Western classical music at a children’s palace.

  The German Goethe Institute once set up a German library with German books, newspaper and magazines, some highly critical of North Korea and its leadership. The center was based at the Grand People’s Study House, also called the National Center of Juche Studies. They were naive in their belief that everybody would have access to this library and angrily pulled out of this otherwise promising experiment later.

  With two managers of the library, we pose on the roof of the Grand People’s Study House overlooking Kim Il Sung Square, with the Teadong River and the Juche Tower in the background. Both were fluent English speakers to whom I delivered technical and scientific literature, sponsored by my employers.

  Pyongyang goes digital

  Going against the image that North Koreans are technologically backwards, Pyongyang actually boasts plenty of computer specialists with a remarkable level of knowledge. Part of this development is because, in 2001, Kim Jong Il declared the 21st century to be “the century of information technology.” When I lived in Pyongyang in the mid-2000s, I noticed a subsequent rush among youth to take computer training classes. Knowing how to work a computer offered something magical to the Korean youngsters, as if it was a window to the outside world.

  Computers were a regular topic discussed by state leaders, factory managers and pupils. They were even included as a subject at the Arirang mass games. The authorities consider technology the recipe for a prosperous future, in line with China’s emphasis on the matter. In many ways this technological push is exposing North Koreans to the outside world. Professor Han from the Academy of Sciences, for instance, once explained to me that experts study foreign technologies and then apply them to North Korea’s development.

  Some boys were selected to work on computers for their innate talents, and during my meetings with them they outdid even my knowledge of computers. They were able to answer literally any complicated question of mine regarding the hardware and software they were using. In one middle school in the capital, I saw a 10-year old boy practice English by putting together an English-language PowerPoint presentation in front of his class, speaking with complicated audiovisual items that only specialists would know. In another classroom, I watched a 14-year-old boy write algorithms in Linux—quite an exertion of brainpower for somebody at that age.

  Only when I asked questions about the internet did they appear somewhat puzzled and overwhelmed. My inquiries, as a matter of fact, were sensitive. The teacher quickly intervened and answered that they use the Korean “intranet,” a countrywide network. It “includes the good parts of the internet and excludes the parts aimed at infiltrating reactionary ideas and poisonous culture into our country,” he said.

  We were proven wrong on our original expectations that North Koreans would be backwards. When a German IT business owner, a French IT entrepreneur and I were setting up the first foreign-invested IT joint venture company in North Korea, we were concerned about the availability and technical competence of the country’s workforce.

  The Frenchman, a mathematician by training, chatted with a number of software engineers from universities and other companies. He quickly realized that their mathematical skills were, for the most part, better than those of colleagues in France and the rest of Europe. This was because the party’s system of picking the best students and harnessing their talents, giving them the privilege of migrating to Pyongyang and living a more comfortable life.

  From a military standpoint, North Korea had a strong rationale for cultivating its best computer minds. 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.

  Given the enormous cost of maintaining a military, the approach actually made sense given North Korea’s limited resources. Purchasing software and investing in computer education costs far less than buying fighter jets and nuclear-powered submarines. North Korea was cushioned from cyber-attacks because it ran an intranet cut off from the outside world, and didn’t have to fear internet retaliation. It could easily intrude foreign computer systems, perhaps by cracking passwords, with the mathematical skills that are abundant in this country.

  From Marx to marketing

  In 2005, the Financial Times wrote:1

  In a business world overrun with MBAs, it can be difficult to stand out from the crowd. But one new qualification is guaranteed to jump off the CV: a degree from the Pyongyang Business School.

  As North Korea’s economic reforms trickle through to the factory level, company managers in this communist stronghold are now learning about market research, buyer behavior and even e-commerce.

  With its first graduates having just received their diplomas, the privately-run Pyongyang Business School is setting its sights on offering a Master of Business Administration….

  …Kang Chun-il, one of the graduates, told a state publication the course had helped him set high aims for the high-technology service center he manages, which offers a digital imaging facility and electronic reading room.

  “Our aim is to raise the country’s economy and technology to a world-leading level as soon as possible and, with this in mind, we welcome all partners who want true and practical co-operation with us,” Mr. Kang said.

  This mindset, that education was key, was a potential panacea to the black hole in North Korea’s economic development. With no end in sight, North Korea had since the 1990s been dependent on a massive wave of foreign humanitarian aid. This problem motivated me to think up a cost-effective way to make food security more reliable and sustainable. I wanted to accomplish this by trying to reactivate the idle enterprises that were supposed to feed millions of employees and their families through the public distribution system.

  North Korean authorities, too quickly became aware that a healthy economy would ease the chronic shortages. They, like me, did not want to
drag along with what they called a culture of aid dependence.

  Solving the problem was easier said than done. We could not help these enterprises purchase badly needed spare parts for their machines, or raw materials for that matter. No investor or sponsor would put up millions of dollars to pay for those operations, especially in what they considered to be a risky market like North Korea. We could, however, train their managers to make the best out of the resources they already had.

  The dilemma was that executives were familiar with receiving and executing orders in this centrally planned economy. To get their operations up to speed, they’d have to abandon much of the old model, and become familiar with basic skills like accounting and controlling, marketing, supply chain management and strategy. With that in mind, I drew up a concept for a course geared at managers, and containing the elements of most MBA degrees in other countries. I sent the idea to some future sponsors: the Swiss government, a handful of multinational corporations and the North Korean government.

  Having worked in lots of sectors in North Korea, I got a strong sense as to how local managers worked and the skills they possessed. With that in mind, I rid the seminar of topics that would have been more suitable for 23-year-old MBA students, focusing instead on know-how tailored for senior executives. Our goal was never to foster an economic elite. We simply wanted to see North Korean managers optimize their practices, make hard currency earnings and raise their businesses to a level fitting for international competition.

  The North Korean government, on the other hand, was indeed wary that we had a political agenda. We put together pilot seminars to show that we, the Swiss initiators, had no strategic interest in overthrowing the system. We wanted to demonstrate to the authorities that this was purely a business school, a provider of the hard skills that both private and state-run bodies needed in both capitalist and socialist societies.

  As the organizer and soon-to-be director, I made the opening speech for the first pilot seminar, a several-day course, called “Strategy and Strategic Management.” I stepped into our first classroom, looking all over at the faces of the officials who attended. I was nervous that, with one small misspeak, the project would be cancelled and my reputation as a politically neutral businessman called into question.

  Yet the students were listening attentively. I soon realized that they were pleased with the seminar topic I had chosen.

  My talk was short, but Professor Peter Abplanalp, an outstanding Swiss expert on business strategies, had to shoulder the heavy burden of a several day talk. That was enough time to commit plenty of blunders. But Peter had been working with Chinese educational institutions for many years and was sensitive to the political minefield. It was perhaps not surprising as the communist Chinese central government awarded him the “Dunhuang Award” and the “Friendship Award,” which is the highest honor awarded to foreign experts in China. It was thanks to him that we passed our first test, and could get the school going.

  I handed the participants a questionnaire in which they had to qualify the seminar contents and the lecturer. Both got surprisingly encouraging remarks. But I still had to do more explaining and convincing with the committee dispatched by the cabinet. In a meeting a handful of men and women in their fifties eyed me in a slightly questionable, perhaps suspicious way and wanted to know more about the role of business schools elsewhere, especially in China and Vietnam.

  One of my topics that day showed the world’s then best airline, Singapore Airlines, was state-owned. Euromoney, a finance magazine, called it in 2004 “the best managed airline” and Travel & Leisure labeled it “the World’s Best International Airline.” The managers running that airline applied the same business administration know-how we wanted to impart in North Korea.

  This anecdote may have motivated Air Koryo to enroll a senior manager in the business school. Another lure may have been my own activities representing a number of first-class multinationals in North Korea. Local businesspeople perhaps saw a networking opportunity, and were interested in doing business with these groups. I planned to partly draw on their huge resources, which the North Koreans were pleased with.

  I welcomed graduate students to a seminar at the PBS (Pyongyang Business School) under the watchful eyes of the country’s leaders, Kim Jong Il and Kim Il Sung. The slight downward slant in their portraits creates an illusion that their eyes follow you everywhere in the room.

  Unfortunately, the raucous and cacophonous world of international politics threw a number of wrenches in our plans. After the first nuclear and missile tests in 2006, a number of multinationals and wealthy individuals changed their minds about sponsorship. They feared getting caught in the middle of tightened sanctions and the bitter controversy that could ensue if they were perceived to be working with a “pariah” regime.

  The project was in jeopardy, so I took extra pains to carefully select the lecturers. I mostly took on those with an academic teaching background plus long-running business experience in Asia and elsewhere. I briefed them thoroughly on the sensitive political nature of their lectures, urging them, for instance, not to talk about the South Korean chaebol like Samsung and Hyundai. I revised and sometimes censored their lectures and teaching materials.

  Many of the lecturers were high achievers in their respective industries. Most came from Hong Kong, but others came from all over the world. For example, one teacher of international marketing was a vice president at ABB, and a pioneer in developing new markets around the world. Other lecturers came from business backgrounds in Europe and Asia, with long careers at ABB, Siemens, Sony and Apple. Yet another was a Singaporean who was the head of SKF’s logistics center in Asia, and is one of the world’s foremost experts in supply chain management.

  I also invited a Swedish ambassador (and, by training, economist) to talk about the European Union and its markets, business and investors. With this colorful blend of nationalities and backgrounds coming and going on short lecturing trips, it was clear we carried no political agenda. We were very pragmatic, not following a single ideology—as were our North Korean partners.

  In the mid-2000s, one joint New Year’s editorial in the country’s leading newspapers—where the next year’s priorities were outlined for the country—mentioned that companies needed a strategy. It was the first instance, to my knowledge, when the concepts of a corporate strategy, along with strategic management, had been raised in a North Korean editorial. The Party, it seemed, had learned about our strategy seminar and recommended it through its press mouthpieces. This seminar, and others, had indeed been translated into Korean, and then published in English and Korean. We had them widely distributed to ministries, academies, universities and enterprises.

  The newspaper was surely right that students were shifting towards the marketized mode of thinking. But in a country that abandoned the rarified version of socialism decades ago, how could it possibly move away from Marx this late in the game?

  Perhaps the statement is deceiving. I have visited libraries and book shops throughout the country, but have never come across a single book by Marx and Lenin. Yet, for some strange reason, the portraits of both of them were then still hanging exclusively on the walls of the Foreign Trade Ministry in Pyongyang, the one body you’d think would be more forward-minded.

  “Previously I hardly met people, but now I am able to interact and build networks. Thanks to this I got a partner in Hong Kong who invests into the construction of a factory here”.

  “I did not know what a ‘break-even point’ is. Meanwhile I learned how to make profit and I analyzed the past 10 years of our business. This eventually helped me to manage a turn-around of our company”.

  The above is testimony offered by the heads of two North Korean companies who were students at the Pyongyang Business School (PBS), discussing how they applied the lessons of PBS. Their statements were quoted by the Swiss governmental Development and Cooperation Agency in its “Asia Brief,” published in January 2011. 2

  Semin
ar booklets, pictured, spread management and business expertise across the country. The pages on the left were always written in English, while the pages on the right contained the Korean translation. This layout was highly popular among readers who were keen on improving their English language skills. It was common to see North Koreans reading these booklets at bus stops, in libraries, and in restaurants.

  I sometimes happened to bump into former students who, mostly with a broad smile, happily told me that they applied this or that which they had learned at the Pyongyang Business School, that enabled them to increase productivity, reduce customer complaints or raise profitability. They and their companies seemed to have been energized thanks to the PBS which was a good omen for the economy, as there were millions of jobless workers in the terrible crisis years of the 1990s.

  My involvement with the Pyongyang Business School ended at the end of 2010, when the business school was about to be closed. By the following year, the market-driven idealism of those earlier years had withered. Seminars ceased to be held on a regular schedule after the only remaining sponsor, the Swiss government, halted all its development cooperation at the end of that year, following a decision by the Swiss parliament.