If you now drive around Bangkok you would probably notice all those new constructions that are mushrooming around the cities “hot” districts; i.e.: close to famous roads such as Sathorn, Silom and Sukhumvit for condominiums; and in the suburbs such as Nonthaburi, Rangsit, ChangWattana for housing estates. In fact, there seem to be a very high demand especially for modern developments launched by companies such as “Land & House”, “Asian Property Development”, “Pruksa Real Estate” or “SC Asser Corporation” etc… (more than 30 projects will be launched by the end of the year)

Having recently taken part in a “condominium auction” in the center of Bangkok has confirmed our thoughts of what seem to be a “sellers” market (excess of demand over supply). Arriving 45 minutes before the opening was not long enough to give us a head start; there were already about a hundred people lining up (being the first would allow you to get the best spots in the building, with nice view’s, etc.).

When talking to the “prospective buyers” around us we realized that most people at this auction where here to buy and rent out their condo, thus buying it as an “investment” (a single person would end up booking two or three, priced between USD75000 to USD175000 each). According to the “trading screens” (picture bellow), the developer sold about 65 % of all of the units that day; Amazing isn’t it?

Looking back, we all remember the Asian crisis in 1997 (which left many constructions idle in downtown Bangkok due to bad loans)? Well today, there seem to be little concern of a developing property bubble since Thailand’s economy is now more robust then in the 90’s: higher foreign exchange reserves, solid financial market and lower corporate debt. Additionally, interest rates are now relatively low and it is thus easier for young professionals to obtain credits.

This booming trend has already been going on for a while (4-5 years); so until when will at last? Hard to say, will have to follow this trend closely for the next 2-3 years; what is sure is that Thai people (more specifically middle to high class income workers) have a need of “modern” living to match their changing lifestyles. In fact, a “new” standard of quality has emerged and is closer to “western” design and quality standards.

One of the major concerns comes from investors seeking to rent out their condos or buying it as a “second home”. Typically they invest in their condo 2-3 years before the building even breaks ground and make about 25 to 35 % of a building’s occupancy. In reality, this could actually “fake the demand” and risk an “oversupply” in the short term. Furthermore, new buyers would be hit most if this “boom” busts as they are clearly paying a slight premium to be able to “choose”.

Finally, if you are thinking of purchasing a condo in Bangkok you should be aware of the following:

- In general, Thai people like to buy “new”, so if you are buying a new condo with the purpose of selling it in 10 years, maybe not the best idea; they will not pay a premium price for a second hand condo so renting it out would be wiser. If you do, make sure the location is appropriate; close to public transport, universities, government complexes etc…

- Also, you should be aware that condo buildings usually age relatively bad. Constant maintenance is needed and construction standards are still not what they are in the West. Additionally, overall “arbitrage” is a “huge headache”.

So think about it twice! Next week will be continuing our epilogue on “business in Asia” with the current Shanghai Expo!

Auction entrance: with more than 100 people in line...

Waiting area

Red=Sold /Blue= still available (20 minutes after opening)
Mokup of the building which will be finished in 3 years...

After spending 5 days in the last “Stalinist dictatorship” of the world, we have decided to share this unique experience with you.

It is just delicate to start such topic as everything is so unique and different; so, to make it simple, you can imagine China fifty years ago and you will actually come pretty close to today’s reality in North Korea (NK).

You might have heard about the recent disputes between North Korea and the world; i.e: boat sunk, accused espionage coups, weapons of mass destruction etc... Well those events end-up scaring a lot of people, however, it is unlikely that they (for now) generate any serious threat (like a war). The constant intimidations that North Korean leaders claim to the world are mostly “verbal” (they have lasted for decades) and are an “external” continuity to the constant “propaganda” initiated by the father of the current leader Kim Il Song.

This propaganda was verified during our trip. Though we could not talk to the “locals” (our guide and bodyguard would forbid us), the constant references to its leaders images and founding “constitution” are on every street and billboard (see pictures bellow).

Commercially wise; starting to do business in North Korea today would be like starting a business in China before the “Cultural Revolution”. While this would give you a clear “first movers” advantage, you would need significant resources and not be afraid of losing it all on the flip of a coin.

There are several industries with possible opportunities:

The northern part of the Korean peninsula is rich of natural resources such as “coal, iron ore, limestone, magnesite, graphite, copper, zinc, lead, and precious metals”

- Fishing, cement production and agriculture are other important industries.

- The “animation studios” in PyongYang (used by some European companies) are also relatively famous.

- Some more obscure industries such as military hardware, counterfeit products and drugs are known to be an essential part of the country’s overall revenue.

Now when it comes to manufacturing North Korea has several strengths:

- “Its workforce is highly literate and has wages that are about half what Chinese worker would earn”

- “Its geographical location between China and South Korea”

As a result, it becomes interesting for foreign companies (mostly Chinese) to set up a JV with the NK government; in fact many have already open factories; here are two current examples:

1. The manufacturing “village” (Kaesong industrial park) at the DMZ (Demilitarized Zone between the South and the North) which hosts production for textiles, shoes, electronics etc… is monitored by South Korean companies (about 121 companies who jointly invested more than USD$1 billion since 2005); most goods are destined to export.

2. Several success stories have been worked out by supplying the government with “basic goods” (cars, consumer goods, white goods, etc…- some pictures bellow). If you can manage to set-up such deal, one thing is certain; you will have virtually no competition.

Finally, there are so many types of goods and services that are scarce in North Korea that it is just a matter of time (in years or even decades) when numerous opportunities will emerge . Why wouldn’t NK not benefit from the economic growth currently happening in China and around Asia? Maybe we will soon have the answer as Mr. Kim Jong Il (current leader) is looking to appoint his third son, Kim Jong Eun, to a position in his government that would clearly indicate the beginning of a leadership transition.

For your continued interest regarding North Korea:

- You can find several official videos published on Youtube (search for uriminzokkiri - meaning “with us Koreans).

- You can also have a look at “The Pavillon of the DPRK” at the 2010 Shanghai expo: http://www.expo2010-dprkorea.org/Kexhibition/en/index.php.

- An independent organization whose goal is to promote and develop business and trade relations between Europe and North Korea :

http://eba.nosotek.com

- An interesting report (with many pictures) of a Dutch trade mission exploring business opportunities in NK:

http://www.gpic.nl/NK-report2009.pdf

North Korean Political Art...

Folk dance in PyongYang with political art and "nationalistic" music as background...

Local grape juice, beer and mineral water.

Billboard in PyongYang.

North Korean made SUV...