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Peace plays: How foreign companies have lost a bundle in North Korea www.reuters.com

SEOUL (Reuters) - Months before the first summit between leaders of two Koreas in 2000, South Korean tech giant Samsung Electronics Inc (005930.KS) invested $730,000 in Pyongyang’s top computer lab. North Korean programmers there would develop online chess games and food recipes for Samsung to sell outside the North.

Samsung quit the business as inter-Korea relations later deteriorated and the lab - Korea Computer Centre - was blacklisted last year for its alleged contribution to the North’s weapons program.

As companies from South Korea to Russia and China again look to cash in on easing tensions with Pyongyang, Samsung’s now defunct businesses in Pyongyang and hundreds of similar failed joint ventures underline North Korea’s status as one of the world’s highest-risk investment destinations.

Yet days before the historic meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un in Singapore, a conference in Seoul to explore investment opportunities in North Korea drew about 600 attendees.

Samsung C&T Corp 028060.KS, the construction arm of South Korea’s largest conglomerate, set up a task force in May to review potential projects such as building railroads, a company official told Reuters on the sidelines of the conference.

“We are not clear yet on how to move in there, and want to know now how much risks we can take,” the official said, asking not to be named because he was not authorized to speak to media.

Russian gas giant Gazprom (GAZP.MM) and state-run Korea Gas Corp (KOGAS) (036460.KS) have held talks over the past two months to discuss a possible construction of gas pipelines passing through North Korea, a KOGAS spokesman said.

Other South Korean companies including retail giant Lotte and telecom company KT Corp (030200.KS) have also launched teams in recent weeks to study the resumption of stalled North Korea projects, officials said.

With vast mineral resources, poor transport networks, infrastructure and power facilities ripe for major upgrades and a population of nearly 26 million, North Korea is a potentially compelling investment opportunity once economic sanctions against it are lifted.

But risks range from political uncertainty to poor infrastructure, as well as the complexity of international sanctions that will continue to limit business even if they are gradually lifted, say several South Korean officials who have done business with North Korea.

In the case of Samsung, it could not expand its business in North Korea, partly due to U.S. sanctions that limit production of “dual use” items that can be used for weapons programmes, said Dong Yong-sueng, who advised the conglomerate on its North Korean business strategy.

“Samsung could not make even microwave ovens there. Why? The technology used in microwaves is the basis of missile guidance systems,” Dong said.



Published Date:2018-06-22