In Kim Jong Un's Summer Palace, Fun Meets Guns

Asia

Make money in Wonsan

The latest available figures say North Korea spends a bigger share of its GDP on the military than any country in the world - an average of 23 percent between 2004 and 2014, according to the U.S. State Department.

The Wonsan brochures promise healthy profits, including internal rates of return of between 14 percent and 43 percent. The $7.3 million Wonsan Department Store, for example, allows for foreign investors to hold a stake of up to 61.3 percent. In return, it says, investors can expect to make $1.3 million net annual profit.
The brochures offer preferential conditions for foreign investors, saying their rights are protected by the state and they can remit funds abroad without any limitations. Land is available to them to lease, not to own, for 50 years, but investors can trade the leases.

Some of the projects are less generous. One offers the opportunity to cash in on the popularity of North Korean beer with an initial $2.4 million investment in a new Wonsan Brewery. The proposal says foreign investors will be subject to a 15 percent transaction tax, a city management tax, an auto tax, plus other deductions. Then there is income tax at 14 percent. These deductions will nearly halve the projected annual profit, to $154,711.

For domestic investors North Korea officially has no tax, but experts say the state raises funds by collecting about 70 percent of the profits of state enterprises.

A few of the proposals stretch the idea of tourism. They include an Offshore Farm to produce seafoods "of great economic value on an industrial basis, so as to satisfy the demands of tourists and export the products to the foreign market," a lighting factory, a furniture factory, and a renovated Wonsan Fishing Tackle factory. Its output will include 10,000 deep sea floats, 750 tonnes of ropes and 2,500 "lifesaving jackets for swimming."

Since the plans were drawn up, the United Nations has tightened sanctions on North Korea to include a ban on seafood exports and curbs on joint ventures.

According to a brochure from 2015, foreign investor interest in the Wonsan project was "growing day by day."

But a Westerner who attended an investment conference in Wonsan in 2015 said North Korean officials showed little understanding of investors' needs. About 200 people, Chinese and Westerners, heard about investment prospects in the zone and were taken on a tour of the area.

"I thought I might be a witness to some actual pragmatism," said Simon Cockerell of Beijing-based Koryo Tours. "But they simply went on about how amazing the opportunities were and couldn't admit any weaknesses or that there may be any issues at all with the area or any of their plans."

Han Jin-myung, a North Korean diplomat who was stationed in Vietnam until 2015 before defecting to South Korea, said he had been tasked with promoting the Wonsan scheme abroad and had little success: "We just ended up selling North Korean herbs and medicines instead."