The welcome mat is not quite out yet. South Korea last week said it would start allowing business deals with the country it was once united with; then later in the week, North Korea rejected the south's offer for direct trade. But multinational marketers in the U.S., Europe and Asia are eagerly looking to the future.
The moves follow the settlement of an international dispute over North Korea's nuclear weapons program. U.S. companies, still prohibited from doing business in North Korea, are hoping that restrictions by the U.S. government will be eased. Those said to be interested include Motorola, General Motors Corp., Ford Motor Co., Hewlett-Packard Co. and Coca-Coca Co.
But the companies directly to the south are the ones that have a leg up because of a common language and heritage. Leading conglomerates Hyundai Group, Daewoo Corp., Lucky-Goldstar and Samsung Corp. have expressed interest in businesses ranging from developing a resort near the demilitarized zone separating the two countries to producing clothing, housewares and electronics.
"Koreans are very aggressive in the development of their industries and increasingly becoming world players, and I can't imagine that they will let anyone get ahead of them in that market," said Andrew Allen, exec VP-international operations at Bozell Worldwide, New York. The agency's South Korean business, Cheil Bozell, Seoul, is a joint venture with the country's No. 1, Cheil Communications.
The South Koreans' interest is twofold. With monthly wages averaging $45, the north offers a cheap labor pool to help keep South Korea competitive in world markets. South Korean companies grew internationally by offering cheaper goods, such as cars and electronics. But as the economy has risen, so have labor costs.
Secondly, the North Korean consumer market is expected to grow quickly as people gain access to much desired consumer goods, similar to what has occurred in Russia and China.
"The growth rate [could be] spectacular as the North Korean consumer grows to match the South Korean consumer," Mr. Allen said. "There aren't too many markets that could change as quickly as that. I haven't traveled in North Korea so I can't tell you that it's a free enterprise desert, but that would be my guess."
But there are still obstacles. As in many countries emerging from or still under totalitarian regimes, North Korea has a poor infrastructure. And though the country is seeking foreign investment to aid its ailing economy, virtually no consumer research is available to marketers.
The International Monetary Fund estimates North Korea's gross national product last year was $20.5 billion, after shrinking 5% annually since 1990. That makes the country's GNP about one-16th the size of South Korea's even though the south has nearly double the population, at 43.5 million.
Foreign trade has been dropping since 1991. Last year, exports totaled $938 million while imports were $1.54 billion.
Mr. Allen said Bozell is prepared to move aggressively "with our Cheil partners to help all our relevant clients," whom he declined to name.