Sunday, July 4, 2004
Hyundai arm injects $1bn in N Korea
REUTERS
MOUNT KUMGANG (NORTH KOREA): A subsidiary of South Korea's Hyundai group has sunk more than $1bn into North Korea over five years for no clear return, but the firm believes the huge costs are worth it.
"It is very difficult doing business in North Korea and you need to have the resolve to get through the problems," Kim Yoon-kyu, the CEO of Hyundai Asan, said, at the opening of a new beach development in the North's Mount Kumgang area, where it has a 50-year franchise to operate tourism.
Mr Yoon-kyu made no mention of the "cash for summit" scandal, in which he and a group of senior government officials and executives were convicted last year for the transfer of $500m to North Korea through Asan.
The money was transferred in '00, just before then South Korean president Kim Dae-jung held a summit with North Korean leader Kim Jong-il. Jail sentences for the officials and executives, including Mr Yoon-kyu, were suspended and they were pardoned by President Roh Moo-hyun in May. Mr Yoon-kyu said Asan had spent $1.2bn since it started bringing tourists to Mount Kumgang. and on an industrial park in Kaesong, on the North's side of the heavily militarised border, for firms from the South to utilise cheaper labour.
He said it had to spend $500m alone on improving basic infrastructure over the period in its poverty stricken neighbour.
But Mr Yoon-kyu said the firm was just at the beginning of its projects in North Korea, which remains technically at war with the South after the 1950-53 Korean War ended in truce and not a full peace treaty.
"To reduce tensions between North and South, this kind of business is necessary," he said, referring to the belief by many in the South that increased business cooperation is a key way to resolve political tensions.
North Korean leader Kim Jong-il has allowed some tentative market reforms in the communist country over the past few years and economic exchanges between the two Koreas have increased, but diplomatic relations remain thorny.
Hyundai Asan began cruises to Mount Kumgang on the peninsula's east coast and followed that up with three-day land tours when a road opened last year, but so far they have not made money. The firm is now hoping that easier access via road and shorter stays will turn the business around.
The firm has added a range of water sports and such as jet skis in the hope of luring tourists to the beach, which is surrounded by craggy mountains some with political slogans carved into the sheer rock face such as "Kim Jong-il, born to be a great general".
The company owns 100 km of coastline it could potentially develop in this area for tourism alongside spectacular mountains. Despite an impasse on the political front over North Korea's nuclear weapons programme, Hyundai's Yoon-kyu said he felt the cash-pressed North was becoming much more open to allowing business projects.
"North Korea has become more aggressive about doing this," he said.
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