How does Felix Abt, North Korea’s most famous foreign

businessman, read the inner workings of the Hermit Kingdom ?

Felix Abt (left) together with the chairman of Pugang, one of North Korea’s largest industrial
conglomerates.

Forbes: For centuries, fair and balanced international trade has been the best way to protect international
peace. Trade has been largely responsible for the Détente between the USSR and the USA in the
1970’s, between China and capitalist western countries in the 1980’s, or between Vietnam and the USA
in the 1990’s. Conversely, economically isolated countries like Germany in the 1930’s, the USSR in the
1950’s, or even the UK in the 1800’s tend to be more aggressive, as their population is deprived of the
higher standards of living that they would have if they could trade. When you were in North Korea from
2002 to 2009, you witnessed a first period between 2002 and 2006 where international sanctions were
small, and then another one from North Korea’s first nuclear test in 2006 where DPRK’s economy was
increasingly strangled. Did you see a corresponding rise in nationalism and militarism within the general
public as a result of international sanctions, thus creating a spiral of more and more militarism, or would
you say that North Korean nationalism is fairly stable across the period and why ?

Felix Abt: “When goods don’t cross borders, Soldiers will". This sentence, often quoted and wrongly
attributed to the French economist and politician Claude-Frédéric Bastiat, nails it. A country, besieged
militarily and economically, can by definition not be “open and free” as we understand it and will therefore
not tolerate any dissent. And as long as, what the DPRK calls, its “sworn enemy” (the U.S.) refuses to
sign a peace treaty to end the Korean war and to normalize its relations with it, North Korea’s willingness
to reform and change is hampered. The stronger the sanctions became (also during the Trump
administration), perceived as an existential regime change threat, the more Pyongyang boosted its
nuclear and missiles development program.
More personally, your question relates to what motivated me to take on the job as North Korea country
director by the Swiss-Swedish ABB group (a global leader in power and automation technologies) in
2002: The geopolitical environment with relatively few tensions on the one hand and North Korea’s
willingness to carry out economic reforms on the other looked then promising for economic development.
When I arrived in Pyongyang the mood among my North Korean staff and business partners and among
authorities as well as the small resident local foreign business community was upbeat. Western
businesses, including American and even South Korean businesses to a certain extent, were welcome to
invest and trade with the North. I became the first president of the first foreign chamber of commerce
called European Business Association, which was cofounded by managers who represented companies
such as DHL, British Tobacco and the Russian Railways. As president I lobbied for economic reforms and
a level playing field for all businesses and against Western sanctions and other coercive means which
posed a threat to reforms and development.
After 2006, unlike foreign businesses humanitarian NGOs were less welcome because NGOs were
suspected of pursuing a hidden political agenda by the government. As the sanctions increased, which
were also more and more perceived as a regime change program, the DPRK boosted its nuclear program
and that vicious circle really hurt the business community.

Forbes: In North Korea, you were the CEO of Pyongsu, a foreign-Korean joint venture chain of
pharmacies in Pyongyang. In your staff, there was of course a party committee, where workers gathered,
talked about the local problems of the firm and engaged in the construction of socialist values among
themselves. Their secretary reported to the Party about activities at Pyongsu. In short, workers were
strongly united, unlike in western countries where the workforce isn’t politically organized. As the
government in North Korea is also communist, the balance of power between labour and capital at the
firm was hugely in their favour. However, there wasn’t any strike during your 7 years there. Labour and
capital always found mutually beneficial compromises. In your book A Capitalist to North Korea : my
seven years in the Hermit Kingdom, you tell an interesting story : when you left the firm in 2009, your
successor, albeit antipathetic and contemptuous of Koreans (and vastly ignorant of Korean culture), didn’t
antagonize the workers to the point that they striked or asked the government to send him back to
Europe. They successfully negotiated with him so that the management of the firm remains in the best
interest of all parties. How would you describe the recipe to this success? How would it be possible to
transfer it to European countries like France, prone to social conflicts between capitalists and laborers?

Felix Abt: If it is difficult to transfer the relationship between workers and the management of Japan to
Western countries, as it has been tried before, it’s even more difficult to try to do the same with North
Korea’s example. What Japanese and North Korean managements have in common is that they care
about their workers to the point where they would even paternalize or patronize them, something the
much more individualistic Westerners would not accept. In return Japanese and Korean workers show an
amazing loyalty to their patrons which Western workers would never be able to develop. My North Korean
workers called the company “family” and me “father”. They asked me to care about them like a good
father which I tried to be. When a worker or his/her family got sick we gave them free medication. Or I let
them use the company’s hot showers when they didn’t have hot shower or, on some days, no shower at
all when the water was cut at home. In addition to a decent salary we bought cooking oil, cabbage and
other items popular with Koreans, to give you just some examples.
One of the important reforms that North Korea undertook was to substitute party committees and its
chairman, which were running state enterprises for decades, by technocrats. Moreover, learning about
and adopting modern management techniques became an important cornerstone. The transformation of
the world’s most state-controlled economy to a mixed one with enterprises striving to meet customers’
needs, and reach higher productivity and even generate profits was of course not an easy one. For
example, I was told early on that domestic marketing and selling was not welcome. Advertising was then
still considered as capitalist and was therefore shun. Yet, the North Korean government was pragmatic
enough and understood that a private enterprise (even if it’s a joint venture with a state company) needed
to market its products to survive. So I succeeded to convince the authorities to let our pharmaceutical
enterprise do marketing. We were the first company to do online-marketing on the North Korean intranet
to promote our products and services to doctors and pharmacists all over the country. I also co-founded
and ran North Korea’s first business school, the Pyongyang business school. One of my students
subsequently founded and ran North Korea’s first advertising company in 2006. In most of the businesses
I was involved with, party cells were cooperative and contributed to our shared goals of succeeding
economically and of making stakeholders benefit from the success.
A comparison between an East Asian country with a Western country is interesting: What’s striking here
is the huge difference in that North Korean, Chinese and Vietnamese workers very rarely go on strike. It’s
because East Asians don’t want others to lose their face. So if they don’t agree with the company’s
management or the authorities they would not openly oppose them and fight them legally, in the streets
and otherwise. Instead of choosing a confrontational approach they work within the system and make it
work for them.

Forbes: North Korea is a one-party state which is arguably the most authoritarian country in the world,
with levels of propaganda and enrollment nowhere else seen on the planet. All major companies in North
Korea are state owned, while the State itself is controlled by the Party, whose ideology is quite rigid. One
would be tempted to think that all North Koreans are built in the same mould. Yet, as in all human
societies, North Korea harbors diverse personality types (some more emotional while others more
rational, some more extroverted and others…). How do the more pragmatic North Koreans,
overrepresented in the management of state owned companies, get along with their more dogmatic
counterparts, over represented in the propaganda and the security organs of the Party? In a society
where dissent isn’t tolerated, how are psychological differences handled (some of them being deeply
coded in genetics, such as differences between men and women), so that the harmony of the group is not
threatened by the diversity of the psychologies of North Koreans?
Felix Abt: As long as Koreans don’t openly challenge the party line they can live more or less the normal
life of inhabitants in a developing economy. Private traders have emerged over the last two decades and
private entrepreneurs have started operating their businesses under the cover of a state enterprise with
which they share their profits. And farmers have started cultivating smaller, private plots and sell their
produce to markets for a profit and pay taxes.
One could say perhaps that North Koreans are built in the same mould in that they are all hard-working
but also like to have fun. And that’s true for both North and South Koreans. My workers had no difficulty in
working overtime and they also loved to go on excursions or to have a good time at karaoke. They shared
my principle: work hard, party hard! And I have cracked numerous jokes with employees, customers,
suppliers and even a deputy prime minister. North Koreans, like South Koreans, are witty and have a lot
of humor which challenges the stereotypes of brainwashed automatons that Westerners cherish.
North Koreans also know more about the outside than the rest of the world knows about North Korea. Its
borders with China are porous, tens of thousands of North Koreans have been working in China and
Russia for decades. Many North Koreans have watched foreign films and read foreign books despite
censorship and I have seen the first Disney and Hello Kitty bags appear at schools and in the streets.
Propaganda, even though it has adjusted somewhat, is probably taken more seriously by foreign visitors
than by the pragmatic Koreans themselves. Even the security apparatus has become softer over the
years as Koreans are not harshly punished any longer for minor crimes. The practice of punishing three
generations of a family when someone has committed a crime has been abandoned.
North Koreans were formally classified into three political groups: core class, wavering class, hostile
class. The loyal “core” class of North Koreans include descendants of those who fought Japan’s 1910-45
colonial rule of Korea and families of soldiers killed in the 1950-53 Korean War, as well as peasants and
laborers. They have enjoyed some perks such as preferences in access to housing or employment. The
“class enemies” or “hostile class” were descendants and relatives of people who collaborated with Japan
or opposed state founder Kim Il Sung such as those who defected to South Korea, formerly rich
businessmen, religious figures and landlords. They used to be assigned to live in remote, poorer regions.
In between are the “wavering class” of families of artisans, formerly small shopkeepers and traders, those
repatriated from China and intellectuals educated under Japanese rule. They were employed as low-level
technicians. With the emergence of a middle class from these historical three classes the system is
gradually being transformed. Those with money, regardless of their official class background, can and do
live a much more individualistic lifestyle and are even showing it off. And yes, there are now
differentiations: I have, for example, heard North Koreans utter some interesting nicknames such as the
“Rockefeller of Pyongyang” for a successful oil trader.
On the one hand, you have a certain hierarchy that is typically Confucian. North Koreans are typically as
hierarchical as Chinese or Japanese. Elder people are respected by younger people, people with a higher
social standing get more respect than people with a lower social standing, people with more education get
more respect than people with less education. However, social life also has more informal components.
When I went out with my staff to karaoke bars and restaurants I noticed that, while this hierarchy was still
respected, you also had informal leaders who emerged because they were particularly funny, for
instance. North Korean humour isn’t mean, and also makes the targeted person laugh. For instance, as
many North Koreans usually has one shower per week (the country does not have running water), one
joke goes like this : « How do you know when a man has an affair? Because he has two showers per
week. »
Forbes: North Korea and the West have very different consumption cultures. Indeed, more than politics, it
is probably at the level of individual consumption that one can witness the biggest gap between the two
systems. The West defines economic welfare as a state of multitude. Nothing is more developed than
being at a crossroads in a busy neighborhood with the lights from so many shops competing for our
attention : “in which restaurant will I eat tonight? From what brand should I buy my pack of beer tonight?
What girl on Tinder should I swipe right?”. The logic is the same : the more choice the Western consumer
has, the wealthier he thinks he is. In North Korea, economic welfare is equivalent to the greatness of the
nation. If a North Korean village were to choose between building a great attraction park (or another
monument), three small attraction parks with different themes, or letting each villager manage his own
thing on his own, they would overwhelmingly choose the first option. North Korean life is organized
around giving everybody a few great things to enjoy, while Western life is organized around giving an elite
few a lot of things to enjoy. Having lived in North Korea for seven years, in the West for more than three
decades and in the intermediate country of Vietnam for more than 15 years, where have you found the
happiest people and why?

Felix Abt: I would disagree with you that patriotism pays a big role in North Korean consumption patterns.
North Koreans are indeed very collectivistic, but that translates into that family, friends and work team are
very important to them and they enjoy spending a lot of time together. That differs certainly from French
and other Western people who practice a more individualistic lifestyle instead of a ‘group’ lifestyle. In the
DPRK, playing team sports with colleagues and friends is the number one hobby, and my employees in
DPRK played almost every day after work in front of my factory. Visiting revolutionary landmarks may
instill pride, but is also considered as a revolutionary duty. Yet the time is long gone when they all wore
the same clothes and shoes. You can now see people wearing a much wider variety of fashionable
clothes, belts, bags and sunglasses. And people not only go to Korean eateries, but also to Chinese,
Japanese and Italian style restaurants.
However, as a middle class has arisen in North Korea, so did consumerism. Like in other East Asian
countries, status symbols are important and people are fond of possessing famous brand products. I was
astonished to see so many people wearing Rolex watches even though most of them were not authentic.
I was invited to the opening of the first Adidas shop selling Adidas shirts, shoes and footballs in 2006.
That was quite an event considering that Giorgio Armani opened its retail store in Beijing only 5 years
earlier. 
The Western media had a feeding frenzy over the story-line “desperate North Korean can’t get enough
Choco Pies” with widespread coverage from the likes of CNN, TIME, USA Today, the Wall Street Journal,
the Guardian and the Washington Times in 2014. Its ignorance was striking to me as I have visited North
Korean food processing companies that made snack cakes that were very similar to the South Korean
Choco Pies and a North Korean beverage company, which even used robots from ABB, the company
whose country director I was, produced a drink that looked and tasted like Coca Cola. And if you have a
chance to go to North Korea you should visit some of their countless microbreweries all over the country
which produce amazingly tasty beer.

Forbes: The North Korean communist party has been criticized by fellow Marxist parties for its hereditary
cult power of Kim Il-Sung, Kin Jong-Il, and since 2011 grandson Kim Jong-Un. These critics call this
practice unmarxist, as it is de facto creating a new dynasty incompatible with the ideal of a classless
society. There is an apparent contradiction within North Korea between the high unionization and
politicization of workers and the hereditary nature of power at the top of North Korean society. All elitist
governments, starting with Pinochet’s in Chile, have been discouraging politicization of the masses, trying
to break them into individuals with hardcore pro-market policies, or more recently into tiny groups (for
instance using minority rights such as in British India or in contemporary European countries). How can
populism and elitism go hand in hand in North Korean society? Is the contradiction only solved at the
collective level or is it resolved also at the individual psychic level, so that Nothing Korans really don’t see
any problem in the existence of a red dynasty?

Felix Abt: Outside North Korea, in particular in the West, people talk about the Kim dynasty with founding
father Kim Il Sung, son Kim Jong Il and grandson Kim Jong Un. In North Korea they don’t. In North Korea
the head of state is called Suryong (Great Leader) who oversees the major pillars of the state, that is
party, military and government. So, while it’s true that North Korea’s leaders have been held in high
esteem, the emphasis is not on the family dynasty but on the fact that the leader is the secretary general
of the DPRK Labor Party and the commander of the People’s Army which draw their legitimacy from their
fight against the Japanese colonial power and the war against the American invaders which, despite
having repeatedly been asked by Pyongyang to normalize their relations and to set up an embassy there,
have refused to sign a peace treaty with North Korea to this day. Currently there is only an armistice,
which means the Korean War is America’s longest lasting war and that North Korea feels obliged to use a
very high portion of its small GDP to fund its self-defense and nuclear deterrence.

Forbes: Having worked with foreign investors to North Korea, you had to solve many of the problems that
they faced while investing in the world’s most heavily sanctioned state. For instance, as any payment in
US dollars must go by a US intermediary, the US treasury could confiscate any payment made in US
dollars from and to North Korea. A number of US-made products are blacklisted and their producers
cannot sell them to any North Korean entity. Non US Firms dealing with the US were also scared of legal
hurdles if they had any transaction with a North Korean firm, and routinely refused to sell their products to
your company, let alone buy from it. When you looked for suppliers, customers, or investors, did you
develop a sixth sense to guess which companies wouldn’t be shy dealing with North Korean firms in order
to save your time? Once you were dealing with them, how did you handle your PR so that you wouldn’t
lose their precious support? For instance, did you familiarise them with the culture and the politics of the
country they invested in?

Felix Abt: I was in a lucky position to develop an excellent network. For the European Business
Association which I co-founded and presided, for the Pyongyang Business School which I co-founded and
managed, for the pharmaceutical company I ran, for the IT company I co-founded and whose vice
chairman I was, for the first e-commerce business I helped set up with North Korea’s best painters, there
was always a different North Korean sponsoring organization I dealt with. It helped me get to know all
major companies in the country, universities and other important entities and lots of different people from
all walks of life. I was also interviewed by North Korean TV and newspapers. All this helped open doors
and find the most suitable business partners. For finding foreign partners, having influential foreigners in
one’s board of directors is of paramount importance. One of my board members was a well-connected
Chinese octogenarian businessman who found for us a lot of suppliers in China.
During my first few years in Pyongyang business did not yet face prohibitively high hurdles. Of course, we
didn’t make or receive payments in USD and I couldn’t use my credit card. As American companies were
prohibited by the U.S. government from doing business in North Korea, LinkedIn blocked me. Google and
Facebook, however seemed to ignore the ban which allowed me to continue to use their services until I
left North Korea. Out of necessity I primarily used to work with companies, both domestic and foreign,
based in China for procurement and sales. Though some, even Chinese ones, refused to work with North
Korean companies for fear of U.S. retaliation, I still found enough business partners there. But trying to do
as vital things as rebuilding dilapidated water supply and drainage systems was made impossible by
sanctions as the operating systems were based on Microsoft software for which the U.S. government
would not have given its permit. Another project I worked on on behalf of the ABB Group was to
rehabilitate the power grid in order to supply electricity to remote provinces which was an essential
condition to lift millions out of poverty. Sadly, sanctions spoilt its realization. The country’s agriculture and
food security was also massively impaired by the ban of imports of mechanical parts and fuel necessary
to operate agricultural machinery and vehicles to distribute agricultural produce to markets and
consumers.
When I ran the pharmaceutical joint venture it became the first pharma enterprise in the country to be
acknowledged by the WHO as being compliant with its GMP (Good Manufacturing Practices), a standard
followed by serious pharmaceutical enterprises elsewhere, allowing us to win contracts in competitive
bidding against foreign companies. A few years later, sanctions prevented this enterprise from
maintaining these standards. As more UN sanctions plus additional sanctions by individual countries were
imposed on North Korea it became very difficult to do business there and many companies, including
Chinese and Russian ones, stopped doing business there. Sanctions became very confusing and risky.
For example, while you still could import lipsticks from France they were banned by the U.S. and if you
did so and visited the U.S. some day you could be arrested for importing lipsticks from France.
The de facto death knell for foreign businesses came in 2018 when President Trump launched his
“maximum pressure” campaign which included an almost complete import and export ban and the ban of
new investment by foreigners. North Korea wasn’t allowed to generate any revenues with its exportable
products any longer and therefore wasn’t able to pay with hard currency for imports.