North Korea To Build The Next Google?

Authorities in North Korea have given their blessing to a collection of startups, with representatives traveling abroad to find new ideas.

Around 15 North Koreans have been on a trip around Southeast Asia to visit incubators and coworking spaces, including the space where Mashable has its Asia office. Victoria Ho explains how the visit went.

North Korean delegation visits Southeast Asia

She relates how the visitors were interested in the business model of the startups in the building, in addition to the working of the space itself. Among the questions they asked were whether startups were registered with the Singapore government, and whether companies paid for the space or the government did.

The group of North Koreans will be traveling around Southeast Asia for three months, and previously visited Malaysia’s Multimedia Development Corporation (Mdec) and the Malaysian Global Innovation and Creativity Centre (Magic) in Kuala Lumpur. Both are government-run bodies related to startups.

The majority of the visitors were academics and researchers working for North Korean tech firms, which are of course owned by the government. Their visit was the idea of Choson Exchange, an NGO that helps North Koreans work on their entrepreneurial skills.

How can socialist North Korea make startups work?

According to the visitors, their job is to study how the North Korean government can build infrastructure that will encourage the formation of startups in the country. Kim Kwang Chol, a senior researcher with the UnJong Hi-Tech Corporation, said he was interested in the different business models he had seen, and was thinking about how they could be implemented in North Korea.

“Yeah, we are a socialist country not capitalist, so we have to find a way of making startups work in a ‘hybrid’ setup,” he said. As it stands North Korean startups do not have easy access to private investors, but instead rely on government “subsidies” to cover running costs. Kim did not comment on what happens when a startup starts to turn a profit.

Another participant said that startups usually born with a letter to the government. “The government will help to solve their problems if they write,” he said. After that, people with ideas will often attend domestic expos to show off their work.

Special economic zones held back by North Korean government

Another attendee, Ri Song, works for the Pyongyang International Information Center for New Technology and Economy, said that startups are working in other areas as well as technology. Efforts are also being made to develop its 29 special economic zones.

Maufacturing and tourism hub Rason was the first of its kind when it was set up in the early ’90s, and enjoyed $37 million of investment from foreign companies. The idea proved moderately successful, and North Korea later set up 20 more in 2013-14.

However the zones have been criticized by some analysts, who say that North Korea‘s judicial system and lack of infrastructure prevent the zones from making a meaningful contribution to the national economy. A recent paper by IHS said that there are “core obstacles” that remain before North Korea can benefit from sustainable and safe foreign investment, with particular emphasis on Pyongyang’s isolation in the international community.

Pyonyang looking to the future?

Ri did not seem outwardly worried by this, claiming that “the government wants to help.” Ho later tried to explain the idea of digital news sites to Ri, but he seemed puzzled. That should come as no surprise given the fact that  North Korea only has a closed internet system.

Ho reports that she collected a number of business cards after the networking event, but none had the personal email addresses of the North Korean guests. Any emails would go straight to a generic company-wide address which is presumably monitored by authorities.

The challenge for authorities in Pyongyang will surely be encouraging startups without opening up North Korea to the kind of foreign influence that it fears so much. Given the current economic situation in North Korea, even government subsidies may not be enough to foster the conditions needed to promote innovative digital business.

While Sydney, Singapore and other world cities are trying to emulate the success of London and Silicon Valley, entrepreneurs in those locations have access to private investment. The political system and lack of infrastructure put North Korean entrepreneurs at a distinct disadvantage when it comes to getting their idea off the ground.

The North Korean group may have to press for more than financial assistance from the Kim regime in order to create favorable conditions for investment.