Interview with Alexander Kriebitz on the Knowledge Economy and FDI in North Korea

After publishing “North Korea’s Knowledge Economy and Foreign Direct Investment” in the Fall 2020 volume of North Korea Review, Alexander Kriebitz has kindly answered a few questions that readers may have, or anyone who is curious about FDI and the North Korean economy. To read the full article, please follow the links on our website to access North Korean Review on JSTOR, ProQuest, and EBSCO.

Why is China not providing more support and education to North Korea, given their close economic ties and China's success in the information and technology industries?

I believe that there are several factors limiting and incentivizing technological support for China. Driven by lower labor costs and access to resources, China’s economic involvement in North Korea has been growing throughout the 2000s and early 2010s. However, U.N. sanctions imposed on North Korea in 2017 (Resolution 2371, Resolution 2375 and Resolution 2397) have impeded the creation of new joint ventures and restricted trade with North Korea. This has materialized as a strong decline in bilateral trade and investment as reported by Chinese authorities.

China’s own geopolitical agenda constitutes another important variable in deciphering the low level of technological assistance for Pyongyang, as North Korea’s belligerent actions are perceived as counterproductive for Chinese interests in the region. Providing North Korea with dual-use technologies encouraging or enabling North Korea’s military build-up is a double-edged sword, one whose benefits depend on US-China and China-ROK relations.

Moreover, there are several signs indicating Pyongyang’s fears of Chinese regional hegemony. Even during the Cold War, North Korea repeatedly attempted to diversify commercial exchange and to balance foreign influence. North Korea certainly has an interest in Chinese technologies, but it will try to access technologies from the West and Russia as well, to avoid dependence on Beijing.

These aspects constitute major limitations for technological transfer. Nevertheless, the technological ties between Beijing and Pyongyang are subject to more general tendencies. Rising tensions between China and the U.S. on Hong Kong, Xinjiang and the South China Sea might present an opportunity for North Korea’s leadership to get more access to Chinese technology, without threatening the aim of political self-determination.

Do you believe that the FDI drive and interest in globalization will weaken Kim Jong-un's control over the access his people have to the internet and information from outside the state?

Whether the recent FDI drive will manifest in significant political changes or not hinges on two aspects: Will North Korea be able to attract FDI? Who is the driving force behind FDI liberalization?

The current U.N. sanctions imposed on North Korea are impeding the realization of technology transfer and most companies want to avoid becoming the target of international sanctions, which limit the export of dual use technologies. As a result, FDI - given its limited role in the North Korean economy - will not significantly alter North Korea’s political system and the informational environment of North Korean citizens.

But even if we imagine a substantial increase in FDI driven by a rapprochement between North Korea and the West I would not expect FDI-triggered transformation of North Korea’s political system. The underlying reason is that North Korea does not design FDI in a way that allows for economic spill-overs, (like what happened in China or Vietnam,) but rather attempts to use FDI as a means of rent creation in regime-affiliated business sectors and as an instrument for technological exchange. In other words, North Korea appears to use FDI as a tool of regime stability, and not as an instrument for economic transformation. Cuba is a similar case, one which has seen phases of FDI liberalization without significant changes of the domestic power architecture or a better informational environment for the citizens.

In your article you mention North Korean start-ups. Can you share with us any examples of a North Korean start-up, or the type of start-up that North Korea is interested in?

North Korean start-ups can largely be considered spin-offs of North Korean state-owned enterprises or universities. The Unjong Hi-tech Industrial Corporation, which originated in the environment of the Kim Il-Sung University, would constitute one example of fusing the pivot to knowledge economy into North Korea’s FDI policies. North Korean officials and scholars have often pointed to IT, nanotechnology, and bio-engineering as the main fields for collaboration with foreign entities. At the same time, the formulation of the Chinese and Russian AI strategies has received coverage from North Korean media outlets, what underpins the general perspective of collaboration with foreign institutions.

Can you tell us, based on the state-published materials you have access to, what kind of ideological debates are happening within universities such as Kim Il-Sung University that have been forming technology clusters and setting up their own legal institutions? I would say that there are perhaps three debates on commercial ties to foreign institutions within North Korea: How should North Korea realize its aim to transform into a knowledge economy? Which role should FDI play in this context? What measures should be enacted to attract foreign investors?

The goal of transforming North Korea into a knowledge economy has not been challenged by domestic scholars. In fact, North Korea has been open to technology for a long time, and it is rather the role of FDI that is more contested. North Korea’s ideology has historically emphasized economic autarky as a pillar of foreign trade legislation. At the same time, scholars have stressed the fact that globalization has been dominated by Western countries, which means it was perceived as a threat to North Korean interests. Nevertheless, the observation that globalization and international technology transfer has been beneficial to large parts of Asia has been acknowledged by North Korean scholars. Joint-ventures, and also their implementation in terms of legal mechanisms, have been intensively discussed in North Korean publications, including the role of tax incentives, human capital and infrastructure including the domestic start-ups (신생기업 in North Korean). Moreover, the role of technology has been pointed out by North Korean FDI legislation (compare: Art. 3 Regulations of the DPRK for the Establishment of Economic Development Parks).

I guess that the general conclusion drawn by Pyongyang can be summarized as “let us direct foreign investment in the tech sector, but on our terms and without destabilizing our political system.”

Interview by NKR Intern Elizabeth Campbell

***The views expressed herein do not necessarily represent the opinions of NKR or the Yonsei Institute for North Korean Studies.