An Un-healthy Bid’ness Climate



Growing up in Texas one often heard the local politicians bragging about the state’s “healthy bid’ness climate” (that’s “healthy business climate” for readers who do not speak Texan).  The local pols considered a healthy bid’ness climate pretty much a cure-all.

Sadly, our survey of Chinese enterprises suggests that the business climate in North Korea may not be too healthy. While the vast majority of our respondents report that they are making money, they complain vociferously about physical infrastructure and the regulatory environment. (Sound familiar?)

The news is not all bad. Slim majorities report that trade liberalization has helped their businesses and expect liberalization trends to continue, though the survey was conducted before the failed currency reform and recent initiatives to re-centralize cross-border exchange, and it is unknown if the respondents would answer the same way today. Only slight majority complain about the quality of North Korean labor.

Most of the businessmen’s ire is reserved for North Korea’s failing infrastructure and capricious regulation. A comparison of Chinese businesses operating in North Korea and a control group that is not, it appears that taxes, a falling currency, and regulatory concerns deter entry into the North Korean market.  As we previously reported, fears of expropriation deter investment. The need to pay bribes is pervasive, and bribe costs are non-trivial. In short, the North Korean business climate could use some work.

If the US decides to re-engage with North Korea perhaps the Obama Administration should invite Texas Governor Rick Perry to join the delegation.  The meeting of those two legendary haircuts would be worth the price of airfare alone.

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