A Capitalist in North Korea. Felix Abt

together a strategy and a marketing plan. One of its core elements was what we called the “quality pharmacy” concept. This idea included not only quality pharmaceuticals for the treatment of more than 90 percent of all diseases, but also the provision of quality customer service and health care advice based on professionalism, expertise, and ethical integrity. It sounds simple, but reaching this pinnacle was easier said than done.

      PyongSu could not compete with the lower prices set by other North Korean companies. Our competitors had the market stacked in their favor because they were politically connected and state-owned. They paid lower salaries, lower electricity and water bills, and had zero land fees. They were also privileged enough to receive raw materials that were, at times, free of charge from both the North Korean government and international donors.

      As a result, our aspirin was dozens of times more expensive than that of our local competitors. For example, 20 tablets of our version of aspirin, or 250 mg in international standard packaging, were about $0.40, compared to $0.015 for the equivalent local product wrapped in a simple manner.

      We had to find a way to distinguish our image as a company that churned out the highest quality of the bunch, and that meant we had to rely on “brand marketing” as much as the quality itself. Before I became managing director, I suggested as a member of the board of directors that we develop a line of branded generic pharmaceuticals. The aspirin was to become PyongSu Spirin and the paracetamol to become PyongSu Cetamol. That plan, it seemed, would give us a distinctive buzz among customers looking for an alternative to the state-produced drugs.

      Dr. T.M., a Seoul-based British economic historian who was a member of the board of directors, tried to mob me out. I was a threat to his consulting firm, which he used to try to bring foreign companies to North Korea, some of which were instead contacting me. He sent alarming mails to the investors telling them, to name one instance, that “problems with Felix Abt seem to increase. The North Koreans tell me that Felix is ‘poking his nose into everything’ and has delayed packaging and signage.”

      Dr. T.M. soon resigned as a director and shareholder, which allowed me to step into the leadership role. My first task was to replace our logo with a newer one, a medicine capsule that became part of a new corporate identity. Later we regularly won contracts from the International Federation of Red Cross and Red Crescent Societies (IFRC), but they demanded that we change the logo from a red to green color. The motif was reserved for them under the 1949 Geneva Conventions and could not be used for commercial purposes. We did so with pleasure, honored to work with such a prestigious body.

      We couldn’t rely too much on our brand image, though. This pharmaceutical business had to be run in a polished, modern way unfamiliar to the North Korean board members. The Chinese industry became our benchmark, because it has been transforming from an outdated socialist public health system to a more market-oriented one. I took my Korean colleagues on study trips to Shijiazhuang, Shenyang, and Shanghai.

      In a visit we hoped would foreshadow our future success, we visited the pharmaceutical joint venture formed between foreign and Chinese investors. To my surprise, the foreign majority shareholder of that company today remains Bristol-Myers Squibb, an American multinational. I also convinced its Chinese octogenarian architect, Henry Jin, to join our company’s board of directors, because he could bring his relevant background to the table.

      In the past in China, multiple government agencies used to give orders and instructions to the management of enterprises for running their daily business. While China had radically streamlined bureaucratic control and delegated power to managers, North Korean enterprises were still micromanaged by the government.

      Smiling and not surprised at the query, the CEO of a large, state-owned pharmaceutical company in Shanghai responded to a question about “government management” from the North Korean members of our board: “The state owns this enterprise. The government does not give us instructions on how to run it. It expects that we are doing it in a competent and profitable way. And if we don’t, they’ll replace us.” The lesson was that this Chinese enterprise was flourishing despite the freedom its management enjoyed. It was a challenge to the hermit state’s management practices.