[ABBVF] ASEA BROWN BOVERI & CIA AG ORD FOREIGN
[ABVIF] ASEA BROWN BOVERI LTD FOREIGN PYONGYANG WATCH
Investing in North Korea: As easy as ABB?
By Aidan Foster-Carter
We live in hope - not yet certainty - that historians will look back on the year 2000 as a turning-point for North Korea, and the peninsula more generally. If that turns out to be so, then among the historic dates - up there with June 13, when Kim met Kim - should be December 1? Why? Because that day saw the the first unambiguous sign that North Korea really does plan to rejoin the planet and become a normal modern country. For the first time, a major global corporation is taking the plunge and going in.
The news came in a press release from ABB (Asea Brown Boveri), the Swedish-Swiss engineering multinational. A few days earlier, ABB's CEO Goran Lindahl had visited Pyongyang and signed what the company describes as "a wide-ranging, long-term cooperation agreement ... aimed at improving the performance of the country's electricity transmission network and basic industries".
Typically, North Korea jumped the gun and announced the visit - and the deal - a few days early, while Lindahl was still in town. (South Korea has the same bad habit, to the vexation of foreign businesses. Not only are agreed press release schedules and embargoes often ignored, but all too often even confidential deals still under negotiation end up plastered all over the local press.)
In this instance, neither party was generous with the details. Unusually for a global multinational, if not for Pyongyang, there isn't a number in sight - so the scale and value of the contract is not revealed. But this is clearly a very big deal, covering nothing less than the modernization of North Korea's entire national electricity grid - whose failings were highlighted in an earlier Pyongyang Watch column.
Even more ambitiously, ABB will also be involved both upstream and downstream of the grid itself. The agreement envisages "upgrading electrical equipment and control systems in power plants and industrial plants". The logic of this is clear, though the task will be immense. Basically, everything in North Korea needs replacing. A new grid, to reduce leakage rates running at up to 40 percent, will be wasted unless matched by modern control equipment to ensure efficient flow and usage - both in power plants and in the factories nationwide which are (or were, till most shut down) the end users.
At the generating end, there is an intriguing mention of "cooperation in the field of wind power and solar energy systems". Hitherto North Korea has relied on hydro-electric and thermal power stations. Both have suffered of late: the former through drought or flood playing havoc with water levels, the latter since many coal mines were flooded. To this will be added nuclear power, if and when two light water reactors (LWRs) promised by the US in the 1994 Agreed Framework are ever built. Yet there are doubts whether nuclear power is viable or appropriate - although the prospect of ABB upgrading the national grid, which in its present state simply could not handle the LWRs, may allay some worries.
But windpower and solar energy sound like 21st century solutions. The former has already been tried on a small scale, in a pioneering and successful village-level project on the Ongjin peninsula in southwestern North Korea by Nautilus, a US NGO with special interests in both energy and northeast Asia. With its far greater resources, ABB will be well placed to extend such experiments across the nation.
Speaking of resources: ABB also has shareholders, and some of them may wonder about profits. CEO Lindahl noted that "ABB's strategy is to move early and develop strong long-term local partnerships in emerging markets". Translation: this will eat money, and not make any for a long time. North Korea is notoriously broke, so its contribution can only be in sites, labor, and possibly materials if quality can be assured. ABB generously talks of "local technical expertise"; but while aptitudes are there, the existing skills will hardly be state of the art. Much training and technology transfer will be needed.
So how and when will ABB turn a profit? The planned structure seems to be a series of joint ventures with various North Korean ministries and enterprises - with ABB having management control. This opens the possibility of such JVs making deals with, or bidding for contracts from, either international bodies such as the World Bank or (perhaps sooner) the South Korean government - as and when aid for rebuilding northern infrastructure, pledged by Kim Dae-jung in Berlin last March, comes on stream.
But my guess is that ABB's vision genuinely is long-term. Analysts increasingly posit a north-south divide for east Asia (never mind Korea), with the north - Japan, China, South Korea - looking better as regards wealth and/or industrial strength and competitiveness than much of the Association of Southeast Asian Nations area.
In such a picture, North Korea today is the missing link. But look at the map. Tomorrow it could be the hub of a dynamic new regional economy: one that melds Chinese labor, Siberian resources, Japanese capital, and South Korean flair. North Korea is slap bang in the middle. That will be ABB's reward.
(Special to Asia Times Online)
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