Updated November. 15, 2011 02:06
North Korea is striving to attract foreign investment to earn foreign currency ahead of its pledged transformation into a great and powerful nation next year, but a string of foreign-invested companies in the North are suffering damage.
According to sources on the North Monday, North Korean authorities have signed double contracts with foreign investors in the North in recent weeks. Even after signing contracts, Pyongyang has unilaterally disposed of assets on its own and rejected profit sharing, causing damage to companies.
In April last year, the North granted to two foreign companies the exclusive rights to develop a mine that a European venture capital firm had invested earlier. Upon learning this, the chairman of the venture firm reportedly visited the North in October last year and demanded an explanation from North Korean officials.
Another European entrepreneur who had been running a joint venture pig farm with the North since 2008 moved to halt operations there, citing unpaid account receivables. He then faced a murder threat.
Conflict also erupted in the course of attracting foreign investment to Musan Mine, the largest iron ore field in the North. Pyongyang is recklessly trying to induce investment targeting companies not only in China but also in Britain and India through its joint venture committee and Taepung Investment Group. This has fueled fears of double contracts with two different investors for a single project.
Chinese authorities complained about this to a senior North Korean official who visited China in May, demanding that Pyongyang take proper action.
The North Korean Embassy in Beijing and provincial governments in China have reportedly received a flurry of civil complaints like We have yet to recover our large-scale loans from North Korea, and The North is redeploying human resources at its own will and delaying administrative assistance.
In light of this situation, the Chinese Commerce Ministry is warning Chinese companies of the investment risk in North Korea after recommending that they slow the pace of investment in August.
Eighty-six investment companies of the General Association of Korean Residents in Japan, a pro-North Korea group also called Chochongryeon in Japan, have advanced to the North, but more than 80 percent of them have suspended projects there.
A source on North Korea said, North Koreas record of investment inducement is sluggish, and most of the investments are limited to small-size investments that can be repaid with materials in-kind over a short period of time, adding, This is because the North has a string of problems, including lack of understanding about capitalism and rampant corruption among government officials amid poor infrastructure and insufficient institutions.