TAIPEI ( TheStreet) -- It's not quite central Hong Kong, but a foreign business community has sprouted in North Korea. Rocket tests put it at risk.The uber-Communist country that assigns foreign visitors to minders, seldom admits Americans at all and last week launched a rocket, is gingerly letting in the politically correct merchants to work in the politically correct fields. Chinese, South Koreans and Europeans, to name the top sources, invest in mines, factories and even video games, to name some of the top enterprises. But let's talk first about the Dec. 12 launch, as angry governments -- as far up as the U.N. Security Council -- have done throughout the world. North Korea just does this kind of thing, even the new leader Kim Jong-un who is said to be more open than predecessor Kim Jung-il to economic reforms. So far none of the missile tests have hit anything of significance (rocket debris fell into the Yellow Sea off South Korea earlier this month). Nor do they prove that the country of 24 million people is preparing to strike one of its archenemies: South Korea, Japan or the U.S. North Korea may truly be planning an attack, but the tests themselves do not lead conclusively to that fallout. Military tests are also geared to make dear leaders look dearer at home, and consider the partying in Pyongyang after last week's launch that was officially geared toward putting a satellite into orbit. And the launches get obvious attention overseas, the way your 5-year-old might by projecting stemware at the kitchen wall. North Korea launched another rocket in April, as widely reported then, but the thing broke apart in flight and was considered a failure. Whether Pyongyang is out to stick something or orbit as it claims or stick an ICBM where it counts, extra-harsh condemnation from abroad could threaten foreign enterprises if the North Korea strikes back at their home countries to get even. Stats are almost impossible to get from North Korea, but the U.N. Conference on Trade and Development says foreign direct investment totaled $1.53 billion last year, up from $1.044 billion in 2000 and $572 million in 1990.
The place feels vaguely like China about 30 years ago when foreign companies were getting a feel for what it took to make or sell stuff there. But the investors in North Korea barely have a toehold today. Some risk being ostracized in their home countries for engaging in the totalitarian regime. Others face business losses from meddling by North Korean authorities, says Leonid Petrov, Korean studies professor at the University of Sydney. Some of the prime examples are South Korean. Hyundai Asan, part of Hyundai Motor ( HYMLF), invests in a North Korean resort, railway construction and an industrial park. But Korean media reports say the north confiscated Hyundai Asan property in the Mt. Kumgang resort area after the shooting death of a tourist in 2008. Other South Korean firms are waiting around who knows how long for Seoul to lift a 2010 ban on trade (except in one area near the demilitarized zone). At stake are mineral resources worth $6.1 billion, according to an East Asia Forum report last year. Most of the Korean Peninsula's minerals are in the north. Companies such as NYSE-listed Pohang Iron and Steel, aka POSCO ( PKX), which mines iron ore, stand to gain from that deal. POSCO share prices are stable, though below record 2008 highs. Chinese-invested firms are picking up where South Korean investors cannot go, according to a 2011 report by the U.S.-Korea Institute at SAIS. Hong Kong-listed, miner MMG (1208.HK) is looking for resources in North Korea, the report says. Also cited among the 138 Chinese ventures in North Korea is Nanjing Panda Electronics Co. (553.HK), one of China's oldest television equipment makers. China's lead more than makes sense. Not only does Beijing temper its rebukes against Pyongyang's hardware tests, it also gives food and fuel aid to its Communist neighbor, which faces industrial sloth without energy and periodic public hunger without the free meals. China is not going to cut trade or produce what the Institute report refers to as "ideological exports." Companies from other countries are also sniffing around at the iron gates. Some private operators in the cottage travel industry are already seeing profits as about 70,000 foreigners visited the country in the year ending in November, Petrov says. If their governments stick with just the standard pretend-to-be-outraged reactions, nothing too fiery or threatening, to North Korea's military hardware tests, they might see eventual deals with Pyongyang and a boost in share prices.
But for now, stock traders keen on a dividend from Pyongyang should stick to the so-far unshakeable listed Chinese firms. At the time of publication the author held no positions in any of the stocks mentioned. Follow @ChinaWatchRalph This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.