Why Samsung chief Jay Y. Lee is headed to North Korea

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The chief of Samsung’s sprawling enterprise empire will go to North Korea this week together with the heads of different high South Korean firms.

Jay Y. Lee, Samsung’s billionaire chief, is one in all almost a dozen enterprise leaders touring to Pyongyang with South Korean President Moon Jae-in on Tuesday, based on a press release from the president’s workplace.

Moon will meet with North Korean chief Kim Jong Un through the go to — the primary journey to Pyongyang by a sitting South Korean president since 2007. It displays warming ties between the 2 governments, which have fueled hopes of deeper financial cooperation.

Moon laid out bold plans final month that might dramatically rework and join the 2 economies, giving South Korea a land hyperlink to the remainder of the Asian continent, doubtlessly opening up profitable commerce and infrastructure hyperlinks.

Such plans may ultimately profit Samsung and South Korea’s different big family-run conglomerates, that are often known as chaebol. Past Samsung Electronics (SSNLF), the world’s greatest smartphone maker, Samsung companies additionally embrace engineering, building and shipbuilding.

“If South Korea can take the initiative to convey chaebol leaders to North Korea … possibly it will be an excellent begin for South Korean [money] to maneuver into Pyongyang,” mentioned Steve Chung, a Korea skilled on the Chinese language College of Hong Kong.

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Jay Y. Lee, vice chairman of Samsung Electronics, is becoming a member of a presidential delegation visiting Pyongyang this week.

However it’s uncertain Samsung might be establishing store in North Korea any time quickly.

Lee and the opposite enterprise leaders are becoming a member of the delegation extra out of a way of obligation to the federal government than in quest of promising enterprise alternatives, based on SK Kim, an analyst with Daiwa Capital Markets.

Moon’s authorities has been pushing South Korea’s conglomerates to scrub up their acts and enhance company governance, Kim mentioned, making it arduous to say no a presidential request to participate within the go to.

Lee, whose Korean title is Lee Jae-yong, was convicted final yr of bribery and different corruption prices however was launched from jail in February after his sentence was decreased.

The 50-year-old government turned the de facto chief of Samsung after his father, the group’s chairman, was incapacitated by a coronary heart assault in 2014.

Different high South Korean executives heading to North Korea embrace the heads of Hyundai Motor Group (HYMTF), LG Group and SK Group.

They are going to be assembly with North Korean Vice Premier Ri Ryong Nam, a spokesman for the South Korean president’s workplace mentioned Monday. He mentioned it was “too quickly” to supply an agenda for the conferences.

The spokesman identified that the leaders of South Korean conglomerates had beforehand joined presidential delegations to North Korea in 2000 and 2007.

A Samsung spokesman declined to remark past the assertion from the president’s workplace.

Dangerous enterprise

North Korea’s cloistered financial system of 25 million folks has enticing parts for international buyers, based on analysts. They embrace an affordable workforce, an excellent geographic location and unexploited pure assets.

Samsung’s funding arm, Samsung Securities, mentioned in June that it was establishing a analysis group to investigate potential future investments in North Korea.

However doing enterprise in North Korea comes with quite a lot of dangers, most notably heavy US and worldwide sanctions on Pyongyang that firms must navigate — until the restrictions are lifted.

The sanctions have slammed the nation’s financial system. Estimates launched by South Korea’s central financial institution earlier this yr present North Korea’s financial system shrank three.5% in 2017. This yr is more likely to be even worse.

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North Korea’s Kim Jong Un and South Korea’s Moon Jae-in have met twice earlier than.

Given North Korea’s financial plight, the “likelihood is low” that this week’s journey will result in enterprise alternatives for Samsung or the opposite South Korean firms, mentioned Kim, the Daiwa analyst.

Overseas firms which have ventured into North Korea beforehand have usually run into difficulties coping with the ruling regime, together with dropping management of belongings.

If Samsung does ultimately arrange store in a extra open North Korea, it could profit from some model recognition.

The authoritarian state has a strict ban on importing South Korean smartphones. However such items are sometimes accessible on the black market, the place Samsung is reportedly probably the most widespread smartphone manufacturers amongst savvy North Korean patrons.

— Yoonjung Search engine optimization contributed to this report.

CNNMoney (Hong Kong) First revealed September 17, 2018: 5:57 AM ET

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