Business and Outsourcing in North Korea: Interview with Paul Tjia

July 24th, 2012

Two weeks ago, NK News dispatched Nicolle Loughlin to the Netherlands for a soon to be published special feature. While she was there, Nicolle took the opportunity to speak to three prominent figures from the Netherlands’  North Korea community, including individuals in the fields of academia, business, and tourism.  Our mini series of Netherlands-based content last week kicked off with an extended interview with Dr. Remco Breuker of Leiden University and today we publish an extended interview with Dutch businessman and North Korea specialist, Paul Tjia.

Paul Tjia is Managing Director of GPI Consultancy, a specialist enterprise in offshore sourcing. Established in 1995, GPI Consultancy is one of the few independent Dutch consultancy firms in the field of ‘offshore sourcing’ and Paul is one of the most experienced offshore consultants in The Netherlands.  As an expert in global sourcing, Paul assists clients with offshore feasibility study and country and partner selection; with North Korea as one of the country’s that he specializes in. In addition to directing GPI Consultancy, Paul also co-authored “Offshoring Information Technology“, a must-read book about IT outsourcing. 

Interview with Mr. Paul Tjia, Director of GPI Consultancy

Paul Tjia

Q: You wrote a 38 North Report recently and in it you said at the Korea Computer Center (KCC) they were developing software for South Korean brand Samsung’s mobile telephones. What effect do you think this will have on inter-Korean relations?

A: Well, the inter Korean relations, they are very much dependent on the attitudes of the governments, or the international political climate. And there are a lot of tensions nowadays. So this example of KCC I think dates back from the Sunshine Policy where relations were much better. And what you see is that, at least in North Korea, the companies have no problems in working together with the South Koreans. As a matter of fact, not only in IT, but in garments as well there is still a lot of cooperation between North and South, but it is very much dependent on the political situation, and if the political situation is deteriorating, then it has a negative effect on the individual company collaboration. And that’s a pity of course because the South and the North in many fields could easily collaborate. In the North there is a lot of technological knowledge available, while they are quite inexpensive, so that’s an interesting situation for cooperation. But the South Korean government really makes cooperation difficult. I think it is even forbidden for the South Koreans to explore business opportunities with the North. So that’s now the difficult situation because of politics. The South Korean government does not want any improvements in economic collaboration.

Q: Why are North Koreans so keen to study IT related subjects? Are most of the IT workers based in Pyongyang?

A: I think it’s the same as it happened in Holland or maybe in the UK, maybe a longer time ago maybe 10-15 years ago, among young people IT was very popular in Holland, and I presume in the UK as well because it was new and we saw the introduction of computers. So, obviously, it causes a lot of interest among young people, and that’s also the situation in North Korea nowadays, for them its relatively new, if you find a job in IT it’s very comfortable, you can work in your nice office, no manual labour, maybe you can travel abroad to do projects or sometimes get additional education abroad, so that’s all very nice of course, compared with other types of jobs. Most workers are based in Pyongyang. But like KCC which you mentioned, they do have offices all around the country, even in small villages or cities, they do have their own branch offices. So that’s a company working all around the country. Also, I have seen companies in other fields who have offices or factories all around the country. Pyongyang is very important of course, but it’s not the only centre of activity.

Q: Do the people who work in these industries realise how far behind their country is, in comparison with the West or even China?

A: Of course they know how far they are behind. But the strange situation is, in the field of IT for example, sometimes they are not behind. They are even more advanced than western countries. For example, I see applications now being used on IPhones which I have already seen in Pyongyang maybe 10 years ago. There is an example where you hear the music and the app listens to the music, and it tries to find the song and the singer. But this kind of application I already saw 10 years ago in North Korea. So in the field of IT sometimes they are more advanced. But the problem is I would say, that there is a disconnection between what they know and what they can use, so there is a lot of knowledge in IT, but it would be nice, for example, if they could use this knowledge in working for foreign clients to earn money. And that’s easier said than done. So they would like to work for South Koreans but South Korea does not allow it anymore. So that’s a pity of course. And that’s one of their challenges: to make an international connection, and if it doesn’t work with South Korea or with Japan for political reasons, then they must find their clients in other countries. Maybe in Holland or elsewhere.

Q: You mentioned in the same report that the Swiss company Dakor, which the Red Cross and United Nations are clients of,  uses North Korea as a hub. What do you think about this given the Red Cross and UN have criticised North Korea for the lack of human rights and freedoms, but yet are indirectly using them for business. Do you think this is a positive way to support the country?

A: I do not hide that I am also involved in trade with North Korea, so obviously I get a lot of questions about this. I think if you want to assist a country in modernising itself, economic cooperation could be a start. And by the way, we are allowed to do business with North Korea in Holland, there are no restrictions. There are a few restrictions imposted by the UN in relations to arms, missiles, economic sanctions, but they are related to a specific number of sectors. But in the traditional sense, the traditional business sense, when producing software or garments, it is allowed. So, first of all it is allowed in Holland to do business. Also, I think the policy of isolating North Korea does not work, because it is a policy in place for many years already and if we see if it’s beneficial for the population, it would make some sense, but I don’t think so. I also look to the example of China. The China of the cultural revolution and the China of today are two totally different situations. And that expansion of international trade is one of the reasons improvements have been made, or could be made, in China. So, when we are isolating a country for whatever reason, I have my doubts about the results. So I think if you do trade it will not change automatically any situation, but I think a sanction, makes it by definition more difficult to get any kind of results. And also if you want to have an educated middle class who know about the international situation you cannot isolate them. So my view is that trade should be definitely promoted.

Q: Heineken has been exporting to North Korea for a number of years, what do you think about the Netherlands’ relationship with North Korea and what do you expect for future relations?

A: Well it has nothing to do with North Korea, but Holland is a small country and we are depending heavily on our imports and exports for our trade and economy because our local market is a very small one. So many products are imported or exported. For example, Heineken is one of the most famous beer brands in the world, and they are famous because they export to a lot of countries in the world, and North Korea is just one of the countries they are exporting to. So it has nothing to do with a Dutch company or a special Dutch relationship, it is just a Dutch company and they don’t mind where they sell the product; so, they are allowed to sell it in North Korea, and they try to sell it in North Korea. By the way, there is a famous UK example of a factory which has been sold to North Korea and it is now being used in Pyongyang to produce locally made beer which is much more popular than Heineken and much more attractive than Heineken. There are quite a few foreigners willing to import this North Korean beer to be used in other countries. But there is no capacity, everything is already being sold domestically. I think they are already working full capacity with this particular factory. I am not a beer specialist, but its an interesting example as they are importing Heineken beer but maybe in the future they will export their own beer. But Holland is a nation of traders, so if there is any business to be done, they will try to exploit this.

So, Heineken is one example, but you can also find Italian pizza or foreign products being sold in North Korea these days. There is a lot of trade but in specialised fields. For example in chicken eggs. The Dutch produce eggs, sell eggs, fertilised. So when they arrive in North Korea the chicken comes out. Don’t ask me about the name, I think it’s a very strange product. Another example is that in agriculture the Dutch are quite famous.

So this other company are producing flowers in North Korea to be sold in other countries. But they are produced in North Korean greenhouses. I don’t know the name of the flower nor the company, but this is an example of the activity. Another example is sand. We are quite active in Holland in building dams and working with sand, so you can also find sand in the rivers of North Korea and this sand is being sold in other countries. I am not a sand specialist either though. Maybe a more famous example is Philips.

You can find Philip’s products inside North Korea, like televisions or computer monitors. It is important for Holland to trade, because we are such as small country, we really have to trade, but this is a normal situation. So I think its up to other countries to decide whether to trade with North Korea. If they find it useful, they should trade with North Korea, and obviously in Holland, some companies think it useful. I’m sure in other countries there are also companies doing trade, for example, sometimes I visit this international trade fair in Pyongyang and you can see companies from Europe participating; they are from Germany, Italy or Scandinavia. Also from those countries, there is a part of trade we do not know about, so it is difficult to make an assessment, because why should you know about all kind of trades? I mean, it’s a business activity between one company and one country, so as an outsider we do not know much about what is going on, and there are no statistics and it makes it difficult to find information. So I believe there is much more trade going on than we maybe know about.

In terms of the future, we’ve only had diplomatic relations for around 10 years, but that means the basic relationship is rather limited. So we don’t have our own embassy in North Korea, and the North Koreans don’t have their own embassy in Holland, they use Switzerland to do their relations with our country. So the relations so far were limited or minimal, but I expect this will grow in the future, maybe not very fast, but it will improve. First of all, I see in the business field, I expect more active involvement of the Dutch government, to inform the Dutch companies about North Korea but also in order to promote business between the two. The example I gave about the potato project is already an example of government involvement, but Expect this to be more visible in other fields as well, but I expect this to go slowly.

Q: You also organised a trade and investment mission to North Korea, how was this mission received? Did you get a lot of attention from it?

A: The North Koreans like to have this kind of business delegation because they are trying to attract foreign investment and promote international trade. So if there are foreign trade delegations and especially from Europe they appreciate this. There are a lot of Chinese trade delegations, in Europe its less popular so that’s why they like to see this. I think they are also proud of the North Korean restaurant in Amsterdam as there are already several in Asia but not many in Europe, so they like the fact there is the first Europe restaurant in Holland; they appreciate it.

Q: Do the governments in Europe tend to keep out of these business ventures or do they get involved because of the sanctions?

A: It depends on the individual country. Holland is not really promoting trade with North Korea. They agree it is allowed, so they will not interfere, but they will not actively promote trade with North Korea because they follow the approach, maybe leaning a bit towards the United States, and so they don’t want to actively promote trade. Also, other European countries do not want to be involved in trade promotion, they don’t interfere, but they don’t promote it. Some other countries, I believe the Scandinavian countries, are actively promoting trade, so sometimes they also organise trade missions, which isn’t the case in Holland. In Holland there are private organisations doing trade missions, but these are not supported by the government. But in other countries, sometimes the government supports the trade. However, in my view, I think this is changing also for the Dutch government, because they see the commercial reasons there are advantages to trade with North Korea. In Holland, we have an economic recession, and many companies are in need of cheaper locations to produce but also interesting markets to export. And North Korea is both an interesting export country and a production country. So as a government, you can continue to ignore North Korea but for the Dutch companies, it’s not an advantage, they need sometimes guidance or support, and in my view, the Dutch government will change its attitude. It will become a little bit more active in this field than in the past. But this is my expectation only.

Q: Do you think the Euro crisis will affect trade?

A: I think it has already, and one of the reasons is because of the crisis it is much more difficult to sell in Europe and we do not have that much more as in the past. So for example in the field of garments, the consumer does not want to spend more money on purchasing garments, as a matter of fact, they want to spend less on it. So all the shops in Holland selling garments feel the pressure and they want to buy their clothing for a cheaper price and so they go to the producer and say we want to buy it more cheaply. But what happens in China, is that China is not becoming cheaper, but more expensive. So all the Dutch companies active in the trade of textiles must buy cheaper so they cant do it in China cheaply and must go to other countries, maybe North Korea. So the Dutch government should support this finding of new markers, and if they don’t, it’s not beneficial for the Dutch companies.

Q: When North Koreans come over to Holland to work in IT how do they find the working hours and reward systems compared to North Korea?

A: Well mostly they are not working inside the European companies. What happens is the North Korea company sets up their own office abroad, so they work in a kind of North Korean environment. So they are not placed in local companies. They are not really familiar with the local way of working. That’s different to China. They are really working inside Chinese companies, but in Europe that isn’t really the case. In Holland there is another university who employ North Korea scientists, and then the North Koreans are working inside the Dutch university. I don’t know much about it because it’s an area I’m not familiar with – potato diseases. The Dutch are also exporting potatoes to North Korea. What happens is that in every country there are specific types of potato diseases, and North Korea has diseases specific to them. So the North Korea potato disease scientists go to a Dutch agricultural university to research the North Korean potato diseases. So they are really scientists. And as far as I know everything goes smoothly. And the Dutch professors guide this process and the Dutch scientists are also visiting North Korea from time to time. So there is an intensive collaboration, and the Dutch government supports this. This is an example of the Dutch government supporting a business type of collaboration in the field of agriculture. So this Dutch government is not passive anymore, they are already supporting business.

Q: Do they learn Dutch or communicate in English when doing business with Holland?

A:  No, it’s English. I do not advise them to learn Dutch, it is too useless. It’s a useless language. It’s only spoken in Holland, Surinam and an old fashioned version in South Africa.

Q: Do you see an opportunity for Holland to have diplomatic relations with North Korea in the form of an embassy for example?

A: Well we already have diplomatic relations if I remember well dating back to the year 2000, so for around 10 years. But we don’t have separate embassies. But at the moment Holland has an economic crisis, so Holland is closing down embassies in certain countries because of cost reductions. So the questions is whether Holland is willing to set up a embassy in Pyongyang, which I don’t know.  If there  is not a lot of trade, it doesn’t make sense to open or keep an embassy, but Holland closes the embassies in smaller countries, mainly for economic reasons.

Q: Is it easier to set up IT things with, for example, Bangladesh than North Korea?

A: No, it’s the same I would say. But of course there are some advantages in Bangladesh. The first is its easy to access the country. Of course you need the visa but you can get this in one day, for North Korea it takes longer. It’s easier by plane to go to Bangladesh, we could be there tomorrow, but North Korea it’s more difficult, but it is getting easier with China. But accessing the IT companies in Bangladesh is easier, there are directories, you can use the internet or see them at trade fairs in Europe for example, while the North Koreans are more invisible. So even if you want to go to North Korea, it’s not easy to find an address or name of a company, or to make an appointment, that way it’s much more difficult. It often requires contacts in the country, before you can have meaningful relationships.

Q: How do you evaluate the gap between rich and poor? Has IT helped to bring the poorer people into business and is it helping them to improve their lives in any way?

A:  That’s always a debate. If we look at India as it’s the most important outsourcing destination, we can say that IT exporting is successful. There are now more than 1 million Indians in IT and there is spill over to other sectors. So it gives employment, but this is limited to a small group of people. So you cannot say the poor are really benefiting. And if we talk about North Korea, more trade in IT will be beneficial for the companies, as it gives employment and they will also learn what is happening in software development. They will learn about modern ways of working. If you work on banking software, you learn about our way of banking, if you work on insurance software, you learn how we do insurance. If you can learn about logistics in many fields. Its a transfer of knowledge. You have to work in English so the staff will have additional training in English language. But if you talk about if its useful for other sectors, I hope so, but it’s not automatic. Its useful for Bangladesh, but the poor people, I don’t think they get much use out of it. : I think North Korea really wants to do business with the West. They are already open in wanting to find foreign clients, they do not reject them. There is this openness in working with foreigners, but the problem is, for them, it is difficult to get access to the clients. Suppose you are in Pyongyang, but the client is in Holland, there is such a big distance between the two countries and it is difficult to bridge this distance.

Q: Do you think if there was a better communication system that would make a difference in any way?

A: Yes, but actually in the sense of being able to talk with the clients. So that means if a North Korean IT company wants to do business with English clients, they should open their own marketing office in the UK. That would be the most affective way. This is also what I see with the companies for Bangladesh for example, it is very easy for the Bangladeshi to communicate with the companies in Holland as they speak English, use Skype and can use the internet to find the name of the company. But it is not sufficient. You need somebody locally to do the real communication with them, to meet them, so you need to have somebody here. You cant find clients in Bangladesh from Holland. And that;s the challenge for the North Koreans, its very difficult to find clients in Holland if your office is n Pyongyang and not a representative in the country you want to do business with. And that’s the main challenge. Not being open or not open, as the openness is sufficient, they are willing to do trade but they are too isolated.

Q: What would be your advice to anyone wanting to do business with North Korea?

A: I can advise many types of companies to consider working with the North Koreans for two reasons. It is often cheaper to produce in North Korea than in other countries and also export opportunities, so I can easily advise to just think about the country or do some research, that’s all. The advice then is to look themselves, visit North Korea on their own or part of a trade mission, or desk research to see if there are business opportunities. That’s it. I will not say you must do business with North Korea, that’s maybe step 2. It depends on the characteristics of the company of course but to explore North Korea is always wise advice I would say.

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About the Author

Nicolle Loughlin

Nicolle Loughlin first became interested in North Korea whilst studying Chinese history at college which brought her attention to the Korean War. She subsequently spent her time reading and learning about anything she could find related to North Korea. Nicolle Loughlin lives in the UK and is undertaking her final year of university studying English Literature and Mandarin Chinese. Nicolle has particular interests in North Korea's foreign relations and literature about North Korea. Next year, Nicolle intends to begin a masters degree in Asia studies or international relations in order to further and appropriate her knowledge and interests.