- "Despite President Trump's claims that North Korea will become an 'economic powerhouse,' Kim Jong-un's authoritarian regime has been classified as the world's most perilous investment destination for business," Verisk Maplecroft said in its report.
- "Investors are of course aware of the challenges associated with North Korea, but our latest index data reveals an array of risks without parallel anywhere in the world," said Miha Hribernik, head of Asia at Verisk Maplecroft.
- Other experts also stressed that even if sanctions were to be removed, risks for investors remain high, as it's extremely unlikely that North Korea will overhaul itself politically and economically.
With U.S. President Donald Trump declaring repeatedly that North Korea can become "one of the great economic powers" in the world, risk consultancy Verisk Maplecroft tested that claim and found that the rogue state ranks as the least investable country in the world.
Despite the president's claims, "Kim Jong-un's authoritarian regime has been classified as the world's most perilous investment destination for business," Verisk Maplecroft said in a report published before the talks began.
Other experts have also stressed that even if sanctions on Pyongyang were to be removed some day, risks for investors remain very high, as it is extremely unlikely that North Korea will overhaul itself politically and economically.
Ahead of the failed summit with North Korean leader Kim Jong Un, which ended on Thursday without a deal, Trump had dangled the prospect of a stronger economy for the impoverished state — tweeting repeatedly on the topic. Experts say that was part of a negotiating tactic.
Even after talks ended abruptly, the president continued to tout the possibility of the reclusive country becoming "an absolute economic power."
"I think he's got a chance to have one of the most successful countries — rapidly too — on Earth," Trump said of Kim, at a press conference on Thursday at the end of the summit. "There is tremendous potential in North Korea, and I think he's going to lead it to a very important thing, economically. I think it's going to be an absolute economic power."
In a bid to "stress test the US president's assertions," Verisk Maplecroft compared the metrics of 198 countries in a recent study.
To assess how attractive each country was to investors, the consultancy looked at a range of factors including respect for human rights, protection of property rights, and strength of the regulatory framework.
The report said the pariah state performed the worst across all indicators, including "the most severe forms of human rights violations."
Miha Hribernik, head of Asia at Verisk Maplecroft said: "Investors are of course aware of the challenges associated with North Korea, but our latest index data reveals an array of risks without parallel anywhere in the world."
"Even leaving sanctions and geopolitical risks aside, the barriers to investment are so wide-ranging as to be insurmountable for any responsible multinational organisation," he added.
Lifting sanctions on North Korea alone is insufficient. To be attractive to foreign investors, it would require Kim to make reforms to the entire regime — both political and economic, which is extremely unlikely, experts say.
"For the country to be able to attract foreign investors, its autocratic leaders need to show openness to deep structural reforms, which would mean loosening their grip on North Korean society as a whole," said Anwita Basu, country risk service manager for Asia at The Economist Intelligence Unit (EIU).
Verisk Maplecroft said in its report: "If North Korea is to become a potential investment destination for even the least ethically sensitive investors, Kim faces a monumental task in which he personally has little to gain and everything to lose."
Closing the country's notorious forced labor camps would be the first step, it said. But that, combined with a complete overhaul of the country's regulatory system and state institutions, could destabilize the country and "threaten the very survival of the Kim dynasty," the report said.
Besides, putting in place reforms would require openness on the part of the pariah state, but its economic system is being strictly controlled by the military and the ruling Workers' Party of Korea.
If that fundamental transformation of the political and economic system does not occur, it would result in a "severe lack of investment security," said Andrew Gilholm, director of analysis for Greater China and North Asia at Control Risks. That would include non-payment, lack of basic infrastructure and compliance issues.
"That kind of transformation seems extremely unlikely," he added.
While comparisons have been made with Vietnam — and Trump himself has pointed to the country as an example that North Korea could follow — it only goes as far as their shared Communist history, Basu from the EIU pointed out.
Vietnam has undergone "significant" and "dedicated" reforms, and has been consistent in its policy — signs of which are limited in North Korea, she said.
To that end, North Korea seems set to remain off-limits to investors.
"Whatever potential Trump sees in Kim's regime, the vast majority of investors are unlikely to act on his claims," Hribernik added. "The stakes are just too high."