An infant fund management industry focused on North Korea is pressing ahead with long-term projects, despite recent reversals in the political thaw.
The Chosun Development & Investment Fund, a UK-incorporated fund, this year switched to seeking euro investors, partly because Washington’s designation of North Korea as a “rogue state” has made raising dollars even more difficult.
The privately structured, limited partnership fund, founded by Colin McAskill, a businessman active with North Korea since the 1980s, is trying to raise E50 million. It has yet to take in money, much less make an investment, but its formal incorporation indicates willingness among entrepreneurs to give it a try.
McAskill – who is director of the fund manager and senior partner of Koryo Asia Limited, the fund’s sole investment advisor – told Emerging Markets: “We have seen considerable evidence of the reform process initiated by the [North Korean] leader, Kim Jong-il.”
Chosun is not the only fund to see a bright future in North Korea. Fabien Pictet & Partners, another London-based manager, is reportedly planning a fund to invest in joint ventures in North Korea. It already has a hedge fund that invests in South Korean companies that do business with the north, although that is not its main focus.
Phoenix Commercial Ventures, has several joint ventures with the country. Neither Phoenix nor Fabien Pictet respon-ded to written interview requests.
North Korea is a long punt: recent political developments may shift its opening-up from slow back to glacial. Six-party talks continue to aim at ending its nuclear programme, but progress is slow and its links with Syria have not helped. South Korea’s new president, Lee Myung-bak, was elected on a conservative agenda including a tougher attitude to Pyongyang.
Fund interest in North Korea originally received an impetus from Washington itself. In 2000, McAskill was encouraged by the US state department to set up a fund that would help western engagement with North Korea.
But US policy chang-ed, and Chosun’s focus shifted to east Asian backers. The fund’s manager, Anglo-Sino Capital Partners, was authorised by the UK’s Financial Services Authority in May 2006.
Internal reforms were introduced in North Korea in 2002 aimed at ushering in a more market oriented economy, although not everyone shares McAskill’s view about the level of progress.
Since North Korea lacks a stock market and a legal infrastructure to protect investors, Chosun will not invest directly in North Korean companies, but will be “a transaction based fund concentrating initially on the substantial mineral resources”, McAskill said.
These resources have “a proven past history of foreign currency earning potential to provide valuable, much needed, cash flow for the country.” Later, “especially after the resolution of the nuclear issue”, the fund will focus on a wider spectrum of economic activity.