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Hyundai and DPRK make up?

Thursday, November 24th, 2005

Perils of Investing in N. Korea Become Clear to a Pioneer
By Anthony Faiola and Joohee Cho
Washington Post

Hyundai Group pioneered South Korean economic development in North Korea, building hotels and restaurants and sending busloads of tourists across the DMZ. At the time, company officials argued that they were giving their communist northern kin a lesson in capitalism.

Now Hyundai is attempting to resolve a dispute with the North Korean government that has jeopardized more than $1 billion worth of investments. The dispute began in August after Hyundai Asan Corp., the subsidiary in charge of North Korean tourism operations, fired a top executive for allegedly misappropriating more than $1 million in company and South Korean government funds. The dismissal was considered a heavy offense in Pyongyang, the North Korean capital, because the executive in question had been granted several rare meetings with North Korean leader Kim Jong Il. Top Communist Party officials last month abruptly announced a review of all concession rights purchased by the company while secretly courting one of Hyundai’s rivals, South Korea’s Lotte Group, to take over Hyundai’s North Korean operations. Lotte officials, concerned about North Korean business practices, decided they did not want to take over Hyundai’s business.

The dismissal was considered a heavy offense in Pyongyang, the North Korean capital, because the executive in question had been granted several rare meetings with North Korean leader Kim Jong Il. Top Communist Party officials last month abruptly announced a review of all concession rights purchased by the company while secretly courting one of Hyundai’s rivals, South Korea’s Lotte Group, to take over Hyundai’s North Korean operations. Lotte officials, concerned about North Korean business practices, decided they did not want to take over Hyundai’s business.

The actions by North Korea raised serious questions about the wisdom of investing there. Despite the dispute, however, the governments of both South and North Korea are lobbying foreign companies to move into a jointly developed industrial park opened earlier this year in the North Korean border city of Kaesong, where more than 20 South Korean firms employ 8,000 North Koreans. The governments describe the industrial park as an experiment with market reforms. The countries also held a joint trade fair at the economic summit of world leaders last week in the southern city of Pusan.

But since South Korea opened up friendly relations with the North in the late 1990s, more than 1,000 South Korean firms have gone bankrupt or lost significant investments in North Korea, according to South Korea’s Unification Ministry.

Most were small, low-tech enterprises involved in textile-making and rudimentary housewares. But the problems at Hyundai have shown that the fortunes of even the largest investors are linked to the whims of the North’s government.

If you visit Kumgang:
The resort has lost millions of dollars and was constantly hampered by North Korean activities. In 1999, for instance, North Korean agents arrested a vacationing South Korean woman after she suggested that the capitalist South — the 11th-largest economy in the world — enjoyed a higher standard of living than the impoverished North.

Posted in Foreign direct investment, Kaesong Industrial Complex (KIC), Tourism | Comments Closed

North Koreans exposed to foreign masses

Wednesday, November 23rd, 2005

Asia Times
Andrei Lankov
11/23/2005

It was a fine night in Pyongyang in mid-October as I walked a deserted street under the unusually bright stars of the North Korean sky (no industry means no pollution), accompanied by a knowledgeable expert on North Korea.

“Well, I do not understand what the hell they are doing,” said the expert, a former student of mine. “You should not be here, frankly. And those South Koreans, they are even more dangerous. The commander-in-chief is making a mistake, but it will take months before they realize how destructive the impact of the Arirang Festival is for their regime.”

The North Korean capital from August to late October hosted the Arirang Mass Games, a pompous and kitschy Stalinist festival for which 50,000 participants (largely students) were trained for months. The festival was attended by an unprecedented number of foreigners and South Koreans.

Pyongyang’s international hotels, usually half-empty, were completely booked, and five or six flights left the city’s international airport every day. This might not appear a particularly large number, but in more ordinary times the airport, by far the least busy capital airport in East Asia, serves merely four to five flights a week.

There were many Westerners. But most unusual and striking, perhaps, was the powerful presence of South Koreans. For the first time since the division of the country in 1953, pretty much every South Korean who wished to do so could travel to Pyongyang for a short stay.

Seoul tourist companies widely advertised a two-day trip to Pyongyang for the equivalent of US$1,000. This is expensive for a two-day, one-night package. But in Seoul where the average monthly salary is about $2,500, it is certainly feasible. Hence, between 500 and 800 South Koreans flew to Pyongyang daily. In mid-November the South Korean unification minister proudly stated that “about 100,000” South Koreans visited the North this year, and it seems a large number consisted of short-time visitors to the Arirang festival.

North Korean leader Kim Jong-il personally approved admission of the unprecedented numbers of foreigners. Nothing like this has been seen since the World Youth Festival of 1989, and even then no South Koreans (and only a few citizens of developed Western countries) were allowed in.

The reason for this openness is clear: tourists bring money. Obviously, earnings from the Arirang festival were very good, and Kim decided to use the opportunity to fill state coffers. The foreigners were allowed in without too many questions being asked, and the show was extended for a few additional weeks. It looked like easy money; the grandiose show would have taken place with or without fee-paying foreigners.

It is possible that Kim Jong-il was persuaded to open the doors so wide by officials who might have had hidden vested interest in the matter: the days of religious devotion to the official ideology are long gone, and bureaucrats are learning fast how to make their jobs profitable.

It seems, however, that in the long run opening the door will have serious political consequences. For me, on my first visit to Pyongyang in 20 years, it was quite clear that life in North Korea has changed, even if on the surface everything appeared almost the same as in 1985.

My first impression was that Pyongyang was frozen in time, remaining unchanged from the mid-1980s. Very few new buildings, all very moderate in size and design, have appeared over those two decades. Pyongyang still reminds me of a relatively poor Soviet provincial city of the 1970s and presents a striking contrast with booming Beijing, let alone Seoul.

Even the street crowd has not changed that much. Many people are still dressed in Mao jackets or worn military outfits, and there seems to be even less traffic than in 1985. The veteran expats say nowadays there are far more vehicles than in the late 1990s when the famine reached its height, but for me the reference point is 1985, not 1999. All visible changes were minor, such as the introduction of bikes, which until the 1990s were banned from the “revolutionary capital”.

The much-discussed private business was nowhere to be seen, since municipal authorities “cleaned” the city on the eve of the festival, driving away all private vendors along with their stalls and canteens. This was a part of the new political line of re-imposing state controls and cracking down on the non-official economy, but it also destroyed what might be the only serious visual difference between Pyongyang of 1985 and today. Markets continued their activity, but behind high walls and strictly off limits to foreign visitors (but not for expats).

At the same time, Pyongyang does not look destitute. It is a poor city, but not more so than many towns in the less-successful Chinese provinces. This confirms what defectors from North Korea often say. However, the defectors see this “moderate poverty” in an altogether different light, as “great prosperity”. As one recently said, “Pyongyang people are rich, this city lives very well, almost as good as some cities in [Chinese] Manchuria.”

The gap between privileged Pyongyang and countryside is wide. This was clear from a short countryside trip even though our destination was the city of Kaesong, a semi-privileged location. We traveled about a 100 kilometers on a relatively good highway that connects the two major cities, but encountered no more than two dozen vehicles. A couple of decades ago one could see mechanization in the fields, but now all work is done manually.

However, the impression that Pyongyang is “unchanged and unchangeable” is completely wrong. The material environment has not changed much, but the spirit is very different from what it was in 1985.

The most remarkable aspect was the relative freedom with which North Koreans talked to foreigners, particularly about their great interest in everything that happens outside the state borders. This does not necessarily mean that my North Korean interlocutors rushed to say something critical about the authorities – on the contrary, from time to time most of them murmured the ritual phrases about superhuman wisdom and omniscience of the commander-in-chief.

However, back in the 1980s no North Korean dared talk to a foreigner for more than a few minutes, and under no circumstances could the topics stray from the weather and, sometimes, the greatness of the leader. My impression of North Korea in 1984-85 when I lived there was that of a country where not everybody supported the government, but where everyone was scared to death to say otherwise. It would be an overstatement to say that nowadays the fear has gone, but it has certainly waned.

It was important that my interlocutors were ready to ask thorny questions about life in other countries and in particular about South Korea. They asked about salaries in Seoul, about changes in the former Soviet Union after the collapse of communism (“Are people better off or not?”), about the fate of East German bureaucrats after the German unification (“They went to prison, did they?”), and about the reasons for Chinese success.

Sometimes it seemed some of my interlocutors suspected that the South was well ahead of the North in terms of living standards. This suspicion is dangerous to the regime whose claims of legitimacy are based on its alleged ability to deliver better standards of living. The actual gap between the two Koreas is huge. Still, North Koreans are told they are lucky to live in the North, in the prosperous state of juche (self-reliance), and not in the South, which is a destitute colony of the US imperialists.

Since the 1980s, an increasing number of better-informed North Koreans are uncertain about these official claims. However, in the past it would have been unthinkable to ask a stranger such dangerous questions after just a few minutes of conversation. It was also risky to demonstrate interest in the outside world, but this seems not to be the case any more.

One of the most unexpected and important encounters occurred when I was visiting the Chinese embassy. A small crowd attracted my attention. People were carefully studying something inside a large window on the wall; some finished and went away, only to be replaced by others. Of course, I went closer, only to discover that the people’s attention was attracted by pictures hanging in the embassy’s “information window”. The pictures were large and colorful, but otherwise absolutely unremarkable. The photos and captions were no different from the stuff cultural attaches across the globe put on the walls of their embassies – the usual boring fare about growth of shrimp production, new computer classes and state-of-the-art chicken farms. However, in North Korea of 2005 such mundane matters attract a crowd. Those pictures gave a glimpse of outside life.

This small episode was a sign of what now is in the air in North Korea: people are eager to learn more about the outside world. They are less afraid to show their interest in what once was forbidden knowledge, and they are increasingly uncertain about the future.

It seems the arrival of the foreigners has provided North Koreans with far more food for thought. Among the visitors there were younger South Koreans influenced by the left-wing nationalism, which has become increasingly popular in Seoul. These visitors were sometimes willing to cheer the anti-US slogans, and this was discussed in the right-wing South Korean media as yet another sign of North Korea’s ideological penetration. However, it seems that the actual influence is going the other way.

Obviously, the decision to open the doors wide was made suddenly, so North Korean police and security were caught unprepared by the sudden influx of South Koreans. I witnessed the arrival of a new South Korean group to the Yanggak Hotel, and could not help but be impressed by the scene. Remarkable was the lack of the usual North Korean regimentation and the absence of segregation, which is the basic principle in handing all foreigners, especially South Koreans. The unruly and noisy South Korean tourists, fresh from the airport, virtually stormed into the hotel where many North Korean guests (obviously of high social-standing) were staying as well. The chaos created manifold opportunities for short-time encounters. Such encounters likely took place with the North Koreans learning a thing or two about the South.

Most of the South Korean tourists were in their 50s and 60s, obviously many had some personal connection to the North. (Between 1945 and 1953 about 10% of entire North Korean population fled south, and a much smaller but still significant number of leftist South Koreans escaped to Kim Il-sung’s would-be socialist paradise, leaving family members back home). Those of that era are most likely to look for contacts, and also are far more realistic than the young intellectuals who have been brainwashed by the leftist-nationalist ideologues.

The scale of the tourist mini-boom meant that for the first time in their lives many thousand of North Koreans could observe South Koreans closely, even often getting the opportunity to talk to them. This might have grave consequences to the regime. In past it was possible to explain away the good dress and fat complexion of the few South Korean visitors by insisting that they came from the elite. But now North Koreans saw the well-dressed, well-fed, self-assured South Koreans coming to the festival in droves, day after day, week after week? This was what drivers, guides, sales clerks and other North Koreans saw. It was what participants in the Arirang festival saw as well when they had a few minutes to look at the audience.

North Koreans could not help but conclude that the South has an unusually large supply of rich capitalists. And their presence at the Arirang games obviously means that South Koreans cannot be badly off: after all, the “running dogs of the US imperialism” are not supposed to come to such events.

Of course, most encounters were necessarily short, but dress and looks speak volumes and sometimes a few casual words are enough to change a North Korean’s world view dramatically. It is easy to imagine a South Korean woman in her 50s, whose husband is a skilled worker, complaining that her family has been unable to change a car for more than six years – and even easier to imagine the impact such a matter-of-fact remark would have on a North Korean to whom private cars are a symbol of ultimate luxury, something akin to the role of private jets in Americans.

Of course, the people who interacted with the South Koreans and foreigners overwhelmingly came from the elite. Good examples were our three interpreters – the granddaughter of the founding father of the political police, the granddaughter of a prominent negotiator who dealt with the Americans, and a daughter of an ambassador.

However, the arrival of so many South Koreans meant that a large number of less-privileged North Koreans also had access to the visitors, and at least overheard them talk. By North Korean standards a bus driver working for a tourist company holds a good job. Such a man (women are never allowed to drive in North Korea as it is believed to be dangerous for the public) is by no means a member of the inner circle of power, but he has friends and relatives with whom he can share his experience.

So, was my former student right? Was opening the door so wide to foreigners a mistake by Dear Leader Kim Jong-il, a master of survival who felt the allure of easy money and forgot the number one rule of his own policy – “stability is more important than development”?

Or perhaps he was misled by some officials who pocketed some of the revenues? Only time will tell how dangerous the entire affair was for the regime, which survives on isolation and myth-making. It seems the first conclusions are an indication: North Korea decided in early November to close its borders to all tours from mid-December until probably mid-January.

One might assume that they will use this break from tourists to reeducate their tour drivers and explain to them that South Koreans only look rich while really they are poor. Will this work? I doubt it.

Posted in Bicycles, Civil society, Mass games, Tourism | Comments Closed

‘Unification Baby’ Seen as Omen by N. Koreans

Sunday, November 20th, 2005

Los Angeles Times
Barbara Demick
11/20/2005

A South Korean activist gives birth while visiting Pyongyang for an anniversary event. Some in the South suspect the timing was contrived.

While watching child gymnasts tumbling in unison across the field of Kim Il Sung Stadium in a performance heralding the miracle of the North Korean economy, Hwang Seon felt a sharp cramp in her abdomen.

Within minutes, the 32-year-old South Korean tourist was whisked by ambulance across town to Pyongyang’s maternity hospital. There, doctors delivered a 7-pound, 6-ounce girl who has become an instant celebrity and rare source of optimism in this often-forlorn North Korean capital.

The baby is the first born in the North as a South Korean citizen. Her birth Oct. 10 has been hailed as a mystical sign that the half-century-long division of the Korean peninsula is coming to an end.

“Our precious unification baby girl,” is how North Korea’s official KCNA news agency put it.

Hwang, who was more than eight months pregnant when she traveled to North Korea, spent two weeks recuperating in the maternity hospital, where she was treated without charge to around-the-clock nursing care. Her meals included seaweed soup, a Korean traditional postpartum treatment.

North Koreans suggested naming the baby Tongil, or “Reunification”; but that sounded like a boy’s name, so the parents instead opted for Kyoreh, meaning “One People.”

“Everybody said her birth was a lucky omen for the Korean people,” said Hwang, a left-wing political activist who favors rapprochement with the North.

Hwang and her daughter are the best-known South Korean visitors to Pyongyang recently. But from late September until early this month, visitors from the South came in unprecedented numbers to view mass games marking the 60th anniversary of North Kore&s ruling Workers’ Party.

During October, 7,203 South Koreans flew to North Korea on nearly 100 nonstop flights connecting the estranged neighbors.

For the first time, planes bearing the insignia of South Korea’s leading carriers, Korea Air and Asiana Air, became regular sights on the tarmac of Pyongyang’s seldom-visited Sunani airport; North Korea’s national carrier, Air Koryo, likewise was a frequent visitor to Incheon. Previously, there were only occasional charter flights between the airports for special events.

South Koreans in Pyongyang stood out in their colorful Gor-Tex jackets like exotic birds against the monochsomatic North Korean landscape. Almost all carried digital cameras, a rarity in the North.

While North Koreans trudged through the empty boulevards on foot, the South Koreans were transported in fancy tour buses, some of which sported color television monitors and video recorders.

The South Koreans were not permitted to go out unescorted and had to wear large nametags around their necks. At one point, a disoriented man in his 80s, born north of the border, tried to wander out of a Pyongyang hotel in search of his home village, but was blocked by a courteous but insistent North Korean doorman, said a South Korean visitor who witnessed the encounter.

Overall, the South Koreans said, they got the impression that North Korea was on a charm offensive. For example, when some tourists complained about a scene in the mass games that showed North Korean helicopter commandos battling what seemed to be South Korean soldiers, the material was promptly cut out.

The mass games were blatantly designed to tug at the heartstrings of South Koreans. Named “Arirang” after a popular Korean folk song, the program was replete with sentimental tunes and operatic skits about separated families reaching for one another across barbed wire. The show used more than 100,000 performers, many of them holding colored cards to make up intricate mosaics.

Keeping on message, the finale used a backdrop of doves with a message: “The last wish of the father [referring to the late North Korean founder Kim Ii Sung] is reunification of the fatherland.”

When North Koreans speak of reunification, their meaning is radically different from what Americans might think in recalling the collapse of the Berlin Wall in 1989 and the absorption of the communist East by West Germany. Instead, the North Koreans describe a loose confederation under which their nation would keep its own system of government while receiving massive economic aid from the South.

“We don’t want what happened in Germany,” tour guide Pak Gyong Nam said as he showed visitors a 185-foot-high stone arch portraying two women in traditional Korean dress (one representing each Korea) touching hands across a broad thoroughfare known as Reunification Street. “We would be one country, but two governments.

“If Korea is reunified, South Korea will bring in technology and investment. We have great confidence in the future. If we are reunited, no problem.”

The sentiment explains in large part why North Koreans were so enthusiastic about the so-called unification baby.

“Have you heard about the South Korean woman who gave birth?” asked Kim Kyoung Kil, a North Korean lieutenant colonel who was escorting tourists at the demilitarized zone the day after Hwang and her newborn crossed on their way back to Seoul. “It means reunification is near. Only the Americans are preventing it.”

The reunification baby’s birth — which took place on the exact date of the 60th anniversary of the Workers’ Party founding — fits so perfectly into North Korean propaganda that many suspect it was contrived.

Hwang has issued a denial, saying that her due date was 20 days away when she made the trip and that she had scheduled a caesarean section in Seoul for the following week because of complications from a previous birth.

“Even my friends think it was planned, but it’s not so,” said Hwang, who lavished praise on the medical care and nursing she received. “They were very impressive…. Everybody was wonderfiul to me.”

Other South Korean tourists, most of whom were visiting on a two-day tour that cost $1,000, expressed mixed sentiments about their experience.

Student activists and union members who marched onto the field with a pro-reunification flag were greeted by wild applause from North Koreans in the audience.

But some of the southerners were dismayed by what they saw as an unabashed celebration of totalitarianism.

“Rather than being impressed by the extravagant brightness and precision of the mass games, I was shocked at how mechanical those people were and realized how oppressed they are,” said Lee Yong Hoon, a 62-year-old businessman from Suwon. “I realize we can’t rush into reunification until North Koreans can accept concepts of freedom and individuality.”

More than 1 million South Koreans have visited North Korea since 1998, but most have gone only to Mt. Kumgang, in a border-area enclave open to tourists.

The visits last month were the first mass influx of tourists to the North Korean capital. They coincided with a period of rapidly accelerating economic and cultural exchanges between the Koreas.

South Korea’s national assembly is expected Dec. 1 to approve a humanitarian and economic aid package for the North worth $2.5 billion — nearly double last year’s allocation. And the two announced this month that they might field a joint team for the 2008 Olympics in Beijing.

South Korea’s largesse has come under some criticism because of the North’s nuclear program, the subject of six-nation talks. The Bush administration, along with the conservative establishment inside South Korea, has taken the position that rewards should be deferred until the Pyongyang regime dismantles its nuclear weapons.

“Our government is in collusion with North Korea, creating the false illusion that all is quiet on the northern front, when it is not,” said Lee Dong Bok, a former South Korean intelligence official and assemblyman. By allowing its citizens to visit Pyongyang for mass games, he said, “South Korea is helping North Korea promote its propaganda.”

Technically, South Koreans need waivers from their country’s National Security Law — which prohibits support of North Korea— to visit Pyongyang.

Hwang Seon, the baby’s mother and a former student radical, served 34 months in South Korean prisons largely because she made an unauthorized trip to North Korea in 1998.

“The last time I came back [to South Korea] from North Korea, the National Intelligence Service was waiting for me to arrest me,” Hwang recalled. “This time, I held my baby in my arms and was welcomed back with flowers.”

Hwang’s husband was not able to meet his wife and new daughter upon their arrival home. He is in hiding, wanted by South Korean authorities on charges of pro-North Korean activities.

Posted in Mass games, Maternity Hospital, South Korea, Tourism | Comments Closed

An Employee from the Emperor Hotel in Rajin Out to Do Business in a Market Place

Monday, November 14th, 2005

Daily NK
Kim Young Jin
11/14/2005

Employees from the Emperor Hotel in the city of Rajin in North Korea are said to make their livings by doing business in market places. The hotel is well known for its casino.

On the 13th day of this month I had an interview with a manager of the hotel, who I will call Kim Myung Chul (alias, 42 years of age) for the sake of his safety. “The hotel has had much difficulty paying wages to its employees since it closed its casino in February,” he said. “It laid off about half of its 300 employees, and even some of the remaining half had to open restaurants near the hotel or start business in market places for their livings.”

The Emperor Hotel is a five star hotel founded by the Emperor Group in Hong Kong that invested about 24 million dollars in it. It is well known for the finest casino in North Korea.

For the last two years, two high raking Chinese officials have lost a large sum of government money to the casino and the Chinese government complained to the North pressing it to close it. Thus, it was closed in February, and the hotel lost many Chinese tourists. The number of Chinese tourists had been almost 20 thousands a year before. Virtually the hotel is out of business now.

Chae Moon Ho, a former head of Traffic and Transportation Office of Yanbian Autonomous Prefecture in Jilin, China squandered 3,510,000 yuan (more than 434,000 dollars) of government money in the casino and was sentenced to 8 year imprisonment at the first trial. Mr. Wang, a former superintendent of highway construction, wasted 870,000 yuan (about 107,000 dollars) of government money in the casino and was taken into custody.

After these incidents, the Chinese government had prevented travel agencies around Yanbian area from holding North Korean tourism in March this year. It lifted the ban last September.

The following is some excerpts from the interview.

– When did you start to work for the Emperor Hotel?

I have been working in the hotel since 2000. People in Rajin call it Bipa Hotel or the Five Star Hotel. When the hotel was first opened, it was run in a capitalistic way. Even hostesses from Russia and China were recruited. But they have all returned now because they could no longer get paid. It took 3 years to complete its construction. I heard that it had been intended to be a 30 story building, but it is 7 stories high because the Emperor Group cut spending. Visitors were usually foreign gamblers and those Chinese who enjoyed fish and other seafoods.

– How is business now?

Business situation became very tough after the Chinese stopped coming. Usually thousands of Chinese people visited for the summer, and Russian and Chinese gamblers constantly came and went. But since the casino was closed and the Chinese stopped coming, it has been difficult for the employees to be paid. The hotel even laid off half of its employees. At frist 300 people were recruited, but there are less than 150 employees now. Among them, less than 50, mostly janitors, cooks, Karaoche coordinators, massagists, come to the hotel to work.

– Does the owner not pay the employees?

I do not know. Even though the owner is Emperor Group from Hongkong, the employees are controlled by the Administrative Committee of Rajin city. I suppose that wages must be distributed by the civil authorities. Anyhow, I have not been able to be paid since last spring.

– What kind of people are employed in the hotel?

High ranking people were eliminated from the recruit lest they be contaminated by capitalism brought in by foreign gamblers. For example, Kim Il Sung University graduates, partisans, workers involved with law and national defense and their family members were all eliminated. Mostly tall and good looking people from Rajin were accepted.

– How are the employees paid?

At first, we were well paid. We were not rationed but received wages. Until 2000, I received 300 yuan a month. At that time, 1 yuan($0.1237) was equivalent of 25 Chosun(NK) won($0.0125), and rice was quite cheap. Hence 300 yuan made a sound pay. Moreover, we were fed three times a day and allowed to sleep in the hotel, which was considerable benefits for us. But while business was getting difficult, employees were being turned into 8.3 workers one after another. Finally, payment started to be incomplete from last February. We could just take three meals a day thanks to the money the 8.3 workers gave to the hotel.

– What is 8.3 worker?

The hotel forced some of its employees to earn money all by themselves and to give some part of it to the hotel. 8.3 worker is called so because Kim Il Sung ordered the system during a factory visit on a third day of August.

– How do 8.3 workers earm money?

Some workers opened restaurants near the hotel, and others merchandize in market places. There are people like me who are out here in China and do business with old customers. Chinese tourists like to eat fish and other seafoods in Rajin. That’s why 8.3 workers like to open seafood restaurants near the hotel calling them branch restaurants of the hotel. There are more than 10 such restaurants near the hotel. There are also a few souvenir shops. If they earn money, they give some of it to the hotel. Those who merchandize are just like that. If you give some money to the hotel every month, you are not required to go there to work.

– Does the money go to Emperor Group?

No. It goes to the Administrative Committee of Rajin city. The hotel is just a Work Place: we are not under the owner’s control. We are required to take permission from the Administrative Committee to work outside the hotel.

– Do 8.3 workers make much money?

It is advantageous for business to be an employee for the hotel. We do not pay such heavy taxes as ordinary merchandizers do. It is also easier for us to occupy stalls in market places than for ordinary merchandisers.

– What is people’s life like in Rajin recently?

Outsiders envy Rajin and Seonbong because they compose the free trade zone, but the situation is on the contrary. The government takes more from Rajin and Seonbong because of the free trade. Rice is also more expensive. They are good places for the rich to live in but not for the poor.

Posted in China, Economic reform, Foreign direct investment, Gambling, Hoteling, Labor conditions/wages, Rason Economic and Trade Zone (Rajin-Sonbong), Tourism | Comments Closed

In North Korea’s isolated tourist zone, a temple rises

Tuesday, October 4th, 2005

Christian Science Monitor
Donald Kirk
10/4/2005

Its South Korean funders say it offers potential for cultural exchange. But the monk who oversees it readily admits no North Koreans may visit.

As they lead visitors along a trail below craggy rocks inscribed with praise for the late “Great Leader” Kim Il Sung, young North Korean guides offer a carefully crafted narrative.

They criticize President Bush. They take on US policy. And last weekend, they appeared eager to denounce the dismissal of Kim Yoon Kyu, who is currently under investigation for fraud. The South Korean executive worked for more than 10 years to develop this unusual tourist zone on the east coast several miles above the demilitarized zone that separates North and South Korea.

“We are willing to reduce the number of tourists coming here as an expression of our confidence in him,” says Koo Eun Hyun, a smiling 20-year-old, repeating the North’s demand for reinstatement of Mr. Kim as president of Hyundai Asan, part of the Hyundai group, which is investing $1 billion in building the complex.

Mr. Kim led the project, now subsidized by the South Korean government, from the time the first shiploads of visitors sailed from South Korea seven years ago. Tourists now travel by newly paved road, and Hyundai Asan in June announced the millionth visitor – far short of the 5 million it had hoped for.

Indeed, the project loses vast amounts of money, and is likely to lose still more. The standoff over Kim’s dismissal is escalating amid a South Korean investigation into alleged fraud in economic projects in the North – including whether some funds wound up in the hands of North Korean officials – prompting the North to cut the quota of tourists from 1,200 to 600 a day.

Perhaps as a result, Kim Young Hyun, a Hyundai Asan vice president, prefers to talk about a $10 million project, largely funded by South Korea and Hyundai Asan, to rebuild a Buddhist temple complex inside the zone that was largely destroyed in the Korean War. “Buddhism is traditionally the religion for Koreans,” he says. “Cultural exchange can be the foundation of economic exchange.”

The Venerable Jejeong, the scholarly South Korean monk who oversees the complex readily admits that North Koreans are banned from the complex, just as they are from the rest of the zone, except when they come to work. Those few North Koreans on the site, he says, “ask questions about history but do not ask other questions.”

In fact, he says, he’s never talked to North Koreans outside the zone and has no idea how freely – or if – they can practice their religion. Still, he shares the optimism of South Korean authorities about the future.

“We can minimize the differences and find common ground,” says Mr. Jejeong, who has practiced Buddhism in Thailand and San Francisco. “Currently our educational systems are completely different. North Koreans are not interested in religion.”

Jejeong places his hopes for opening the temple to worship “after unification.” He cites an easing of religious restraints in China. “The North Koreans may be influenced by China indirectly,” he muses.

In the meantime, the temple serves as a monument to North Korean propaganda. A plaque in front of the skeletal outlines of new buildings says that Kim Il Sung and his wife, the mother of current leader Kim Jong Il, visited on Sept. 28, 1947. The plaque blames the leveling of the complex on US bombing.

But for now, North Koreans would rather prove their authority over Hyundai Asan than hark back to the war. Tourists who visit traipse along a few familiar trails, attend an acrobatic performance, dip into baths fed by hot springs and dine in modern restaurants, all closed to North Koreans seen toiling with ancient implements in the fields beyond the wire.

They listen as guides extol the beauties of the region, all under the watchful gaze of North Koreans as anxious to parrot policy as to impose fines for littering.

“We regard [Hyundai Asan’s] Kim Yoon Kyu as a pioneer,” says Miss Koo. “We sacrifice profits for the sake of friendship.”

Posted in Civil society, Economic reform, Foreign direct investment, Mt. Kumgang Tourist Special Zone, Religion, Special Economic Zones (Established before 2013), Tourism | Comments Closed

My Name Is Min, Mrs. Min…

Tuesday, September 13th, 2005

Korea Times
Andrei Lankov
9/13/2005

One can imagine how the friends and relatives of Min Yong-mi, a 35 year old housewife, were shocked to learn in June 1998 that the woman was detained as a South Korean special agent who had undergone special training and snuck herself into the North to destabilize the North Korean government.

What did earn the woman, an otherwise quite typical South Korean ajuma, a mother of two children, such a James Bond style reputation? Obviously, few comments she made on June 20, 1999, when talking to a guide while on tour in the Kumgang Mountains.

Actually, the description of what happened at 1:40 pm differ. All reports agree that the entire affair began when Mrs. Min asked a North Korean tour guide or “environmental inspector” how to read a rare Chinese character in one of the names of the Buddha that was carved on a rock. The “inspector” (in all probability, a plain clothes policemen) did not know the character as well. The conversation followed.

According to one version, Mrs. Min merely said that after unification the guide would be able to meet her in Seoul. However, it is more likely that the talk was far less innocent. Obviously, somehow Mrs. Min and her guide began to talk about defectors to the South (still a relatively small group in those days). Mrs. Min assured her North Korean interlocutor that the defectors were doing all right. The guide expressed his disbelief and said that all defectors are sentenced to hard labor. Mrs. Min assured him that this was not the case and said something like “If you come to the South, you will see for itself.” According to another version, she said something more moderate, to the effect that defectors were getting by quite well in the South.

Whatever the case, she was ordered to surrender her provisional ID and pay a fine of $100. Realizing that she was in trouble, Mrs. Min complied immediately, but it was too late. She was detained, accused of subversive propaganda, and spent about a week in detention, being interrogated by officers who arrived from Pyongyang.

The detention of Mrs. Min was the first crisis in the history of the Kumgang Project, then as now the largest joint operation of the two Koreas, a showcase of economic cooperation between the two governments.

The project was conceived in 1989, when Chung Ju-yung, the founder of the Hyundai Group, visited North Korea for the first time. One of the schemes briefly discussed in 1989 was an idea of a large tourist park in the North, to be patronised by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) Mountains which for centuries have been regarded in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the DMZ, the border between two Korean states.

It took, however, a decade and some major political changes to start the project moving. It was only in November 1998 that the Kumgang Mountain Tourist Project began to operate.

The idea was simple. The North Koreans created a type of ghetto for the South Korean visitors. A part of the Kumgang Mountains was fenced off, and the local population was moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbour, while the visitors went on mountain walks and sight-seeing trips.

This clever scheme solved the greatest problem Pyongyang saw in its interactions with the South – the problem of information flow. The North Korean commoners are supposed to believe that their South Korean brethren are suffering under the cruel yoke of the US imperialists. Understandably, their government does not want them to know that the per capita GNP in the South is 20 to 30 times higher than in the North. In the Kumgang Mountain Project the rich Southerners were kept out of sight of the average North Koreans, being accompanied only by a handful of carefully selected minders.

However, there always was a threat that South Koreans would do something improper. They were instructed before their trip not to talk politics at all. But how could those spoilt people from a decadent bourgeoisie society be trusted to behave themselves? A subject lesson in obedience was needed.

Some circumstances make us suspect that the entire affair was prepared in advance, and that the guide was deliberately provoking Mrs. Min. However, this is likely to remain uncertain until the collapse of the North Korean regime and the de-classification of their documents. It is still probable that Mrs. Min was simply unlucky. But it is clear that the North Korean side expected something like it to happen.

Mrs. Min’s ordeal lasted for a week. Pyongyang radio claimed her as a South Korean spy, the tours were suspended for a time, and frantic diplomatic activity ensued. Mrs. Min was released after six days of detention, to spend some time in hospital. But the North Korean authorities had attained their goal: they demonstrated that tourists are better to mind their tongues while enjoying the scenic beauties of the Kumgang area.

There were more detentions of South Korean tourists, none of which received comparable publicity. But the lesson had been given, and South Koreans learned to behave themselves.

The Mrs. Min incident contributed to the ongoing crisis of the Kumgang project. This crisis came to a climax in spring 2001 when the tours were almost discontinued. The Kumgang project was salvaged by a large-scale government intervention, but that is another story…

Posted in Emigration, Emigration statistics, Mt. Kumgang Tourist Special Zone, South Korea, Tourism | Comments Closed

Expanding North Korean Tourism

Monday, July 18th, 2005

Korea Times
7/18/2005

Following Pyongyang’s scheduled return to the nuclear talks, the agreement to expand tourism is welcome news from the North. If the latest changes in the North Korean positions are genuine, they could turn tension into peace on the Korean Peninsula. Much of the credit should go to the Hyundai Group’s untiring efforts and the isolationist country’s bold turnaround toward an open-door policy. At stake is how to keep this momentum for peace and prosperity rolling despite challenges from within and without.

The agreement between North Korean leader Kim Jong-il and visiting Hyundai officials signals the start of full-blown tourism in the North. Next month, South Koreans will be able to climb Mt. Paektu, the nation’s spiritual headspring, from the North Korean side. They will also be able to explore in an hour’s drive from Seoul the rich cultural heritage of Kaesong, old capital of Koryo Dynasty (A.D. 918-1392) from which the country’s name originates. Mt. Kumgang will also open its inner sceneries to southerners.

This “triangular tourism project” will sharply improve the North’s tattered economy. North Korea’s real GDP increased 2.2 percent last year, but that in the accommodation-catering sector jumped 16.3 percent, thanks largely to the Mt. Kumgang tourism business. As South Koreans fly directly to Mt. Paektu or reach the mountain via Pyongyang, the tourists’ dollars will not go to China but to North Korea. The two Koreas also can build a world-class resort belt along the eastern coast starting from Mt. Sorak.

Hyundai will have to make massive investments to expand airports and develop other infrastructure. Although the group has won the exclusive development rights, it is not certain whether it alone can meet all the costs and ensure the project’s commercial viability. North Korea in this regard should refrain from asking excessive charges, as was the case in the Mt. Kumgang project. Nor should there be any recurrence of controversies stemming from under-the-table payments and other murky deals.

Both sides need to take a long-term approach. Just as Mt. Kumgang tourism helped to prevent an escalation of hostilities during naval battles in the West Sea, so can expanded tourism contribute to the establishment of a lasting peace on this peninsula. Therefore, its success depends on finding the equilibrium between peace and commercial dividends. A prerequisite for this balance is genuine trust between the two Koreas, a trust that cannot be shaken by internal splits or changes in external circumstances.

For North Korea, all these inter-Korean projects will help to ensure its security and economic development. As everyone knows, however, what Pyongyang really needs are more brisk economic transactions with the international community after being cleared of nuclear suspicion. And this is why it should show sincerity at the regional disarmament talks next week.

Posted in GDP statistics, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Tourism with a North Korean twist

Tuesday, June 28th, 2005

Asia Times
Andrei Lankov
6/28/2005

This month, Hyundai Asan Corp stated that the number of tourists to have visited the Kumgang Mountain Tourist Project in North Korea since it began operations in 1998 had finally reached one million. This is seen as a reason for some major celebration – as any sufficiently round figure would.

However, in January 1999 Hyundai Asan leaders assured that by the end of 2004, there would have been an accumulative 4.9 million visits to the North. The actual figure was about 900,000. At the same time, Hyundai Asan managers predicted that in 2004 alone some 1.2 million tourists would visit the project. Yet the actual number of visits that year was 274,000.

Does this mean the Kumgang project is a failure? Not quite, since it remains in operation – unlike many other much-trumpeted intra-Korean projects. But it is kept afloat only due to persistent political and financial support from the South Korean government (or, in other words, due to the deepness of the pockets of South Korean taxpayers). Within its short history, the project has been on the verge of bankruptcy, and has even seen its chief executive officer driven to suicide.

The project was conceived in 1989, when Chung Ju-yung, the founder of Hyundai Group, spent a week in North Korea negotiating with the Pyongyang leaders, including president Kim Il-sung himself. The chairman of Korea’s largest industrial conglomerate was born in what is now North Korea, and in last years of his long and eventful life he demonstrated a sentimental attachment to his native land, being the most enthusiastic proponent of South Korean investment in the North.

One of the schemes briefly discussed during his 1989 visit was the idea of setting up a large tourist park in North Korea, to be used by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) mountains, which for centuries have been seen in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the Demilitarized Zone, or DMZ, the border between the two Korean states.

However, it took a decade and some major political changes to start the project moving. By the mid-1990s, Seoul realized that the collapse of North Korea was both unlikely and undesirable, since a German-style unification would be prohibitively costly. Hence, investment to the North and all kinds of direct and indirect aid came to be seen as a necessity by the new left-leaning administration of president Kim Dae-jung, who was elected in 1997.

That meant Chung Ju-yung’s plans received government support. He moved ahead with his characteristic energy, and in November 1998, the Kumgang project began to operate.

The idea was simple. The North Koreans agreed to create a sort of ghetto for South Korean visitors. A part of the Kumgang mountains was fenced off, with all the local population moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbor while the visitors ventured out for mountain walks and sight-seeing. Typically, a tour lasted for four days and three nights, and tourists lived onboard the cruise ship, which doubled as a floating hotel.

This clever scheme solved the problem of information flow, which was seen by Pyongyang as the major obstacle in its interactions with the South. North Korean commoners are supposed to believe that their South Korean brethren suffer under the cruel yoke of US imperialists. Understandably, their government does not want them to know that the per capita gross national project (GNP) in South Korea is 20 to 30 times higher than in the North. The sight of well-dressed South Korean crowds would be damaging for public morale and even political stability, but in the tourist scheme the rich southerners could be kept out of sight of average North Koreans, being accompanied only by a handful of carefully selected minders.

The South Korean visitors also had to behave themselves. They were warned that they could not criticize the North Korean system and its leaders, and that, in general, talking politics with North Korean personnel was not advisable. Transgressions could be punished.

In June 1999, Min Yong-mi, a 35-year-old housewife from Seoul, was engaged in talks with a North Korean minder. She told him a few words about South Korean prosperity and said something to the effect that North Korean defectors in the South were doing well. The reaction was swift: the talkative lady was arrested and spent one week in detention, accused of espionage. Of course she was not put into a real prison, but the ordeal was tough enough to undermine her health. There are good reasons to suspect that the entire affair was a deliberate provocation: the North Korean authorities were waited for something like this to happen to demonstrate that no quasi-political activities would be tolerated. They wanted to make an example of Min, and they generally succeeded: since then, tourists have become far more cautious.

Moneywise, the North Koreans were doing very well, too. The Hyundai Group built all the necessary infrastructure (presumably including the fences to keep the South Korean visitors under control), and also paid US$12 million every month as a fee for the use of the area. Some additional income was earned by North Korea through the sale of grossly overpriced local products and souvenirs.

Initially these conditions were accepted, not only because Chung Ju-yung was sentimental (and over-optimistic) about investment to North Korea, but also because a large tourist flow was expected. According to the above-cited sanguine estimates of 1999, by 2003 the numbers were supposed to reach the level of one million visitors per year – and then exceed them.

However, the plan did not work out as intended. Contrary to initial expectations, South Koreans were not too eager to spend their short vacations behind barbed wire. The early enthusiasm soon wore out, and from 2,000 the numbers of tourists began to decline. The trips were not cheap: the cost in 1998-99 was about 650,000 to 750,000 won (some $500-600 at the current rate). South Koreans soon discovered that for a similar amount of money they could visit China or even some parts of Southeast Asia, where apart from the scenery they would have some exposure to foreign cultures and would not feel under constant control and supervision.

The reformist drive of the Seoul government also contributed to the project’s mounting problems. Until early 2001, other subsidiaries of the mighty Hyundai Group were helping Hyundai Merchandise Marine, which initially operated the Kumgang Project. But as a result of government-initiated reforms of chaebol (conglomerates), the Hyundai Group was disbanded, after which independent companies of the former chaebol were not too eager to keep afloat a struggling project. In April 2001, Hyundai halved the number of trips to Kumgang and stated that the project would be discontinued due to the great loss of money.

Trouble in paradise
The government, however, could not allow this to happen; by that time the project had acquired huge symbolic importance. By 2001, the Kumgang project had become by far the largest intra-Korean economic operation, and the Kim Dae-jung administration, bent on keeping its “sunshine” engagement policy going, could not afford to lose the major symbol of such policy.

A rescue package saved the project from demise. The government-owned Korea National Tourist Organization was ordered to take part in the project and pay some of the overdue bills. The government also occasionally paid for generous discounts for many groups of people. For nine months in 2002, for example, the government paid 70% of the traveling expenses for elementary, middle and high school students, and 60% as well as all costs for students and teachers living in rural areas.

The North Koreans also demonstrated uncharacteristic flexibility when in 2001 they reluctantly agreed to accept payments depending on the number of tourists and the length of their stay, instead of the earlier fixed fee. Currently, these payments amount to $50 per tourist with a standard package of two nights, and $25 for a tourist who stays only one night.

Thus, the project survived the first crisis – only to be struck by a new one. This time, the reasons were political: the opposition uncovered evidence which showed that in order to secure Pyongyang’s agreement to participate in the North-South summit of June 2000, Seoul had secretly transferred $500 million to North Korea.

It was only logical that this clandestine money transfer was conducted with the involvement of Hyundai Asan. First, the survival of the corporation would be impossible without government involvement, and this meant its leaders could hardly say “no” when asked by the authorities to “help” in some delicate affair. Second, being the largest South Korean operation in North Korea, Hyundai Asan had both vested interests in intra-Korean detente and experience in dealing with money transfers of such kinds (there are some good reasons to suspect that the ill-fated “summit fees” were not the only clandestine money transfer to Pyongyang).

The discovery of the “summit bribe” led to a political scandal. An investigation ensued, and the then-head of Hyundai Asan, Chiung Mong-hun, the 55-year-old son of the conglomerate’s founder, found himself in the center of the scandal. He could not handle the stress. Amid mounting political pressures, he committed suicide by throwing himself out of his headquarters’ window on August 4, 2003.

Yet once again the Kumgang project survived the blow. In May of this year, Hyundai Asan stated it would probably make a profit in 2005. If that happens it will be the first time a profit has been recorded in the company’s history – of course, we are talking about ongoing costs and revenues, without considering the estimated $470 million that has been invested in the project so far. Nonetheless, it is clear that the situation has improved over the past few years, even if the actual performance would not be considered satisfactory in a less politically motivated project.

The improvement was brought about by the opening of a land route in 2003 that replaced the earlier cruises. Now, South Korean tourists board buses near the checkpoint and then travel to hotels operated by Hyundai Asan in the same Kumgang area. Currently, two hotels are operational, but the number will probably increase. The new tours can be shorter, with two nights being the norm. The new scheme also cuts down prices considerably, making the trip somewhat more attractive at 300,000 to 400,000 won (roughly, $350-$400) per person.

The basics of the tour remain unchanged, however: South Koreans are placed in a sort of ghetto, behind high fences carefully guarded by sentries. The tourists can shop for North Korean souvenirs, which are sold at exorbitant prices. It seems ant liquor and snake wine (with a real dead snake floating inside the bottle) are especially popular among males – both are believed to be good for virility. An acrobatics show and a hot spring are additional pleasures available for visitors – if they are willing to pay. A visit to the hot spring, for example, costs some $30, or about half of the average annual salary in North Korea.

Outside their hotels, tourists are constantly supervised by their North Korean guides, mostly young girls who are obviously selected for their good looks and, presumably, political reliability. There are some males as well, who dress in plain clothes. All guides are equipped with their Kim Il-sung badges, and are ever ready to deliver a well-rehearsed eulogy to the Great Leader and his son and successor, Dear Leader Kim Jong-il, in suitably exalted tones.

Combined with large iconic pictures of Kim Il-sung and Kim Jong-il on major crossroads and eulogies to their greatness carved in mountain rock, this creates a very bizarre picture of time travel: for one who wants to experience the feelings of visitors to Mao Zedong’s China in the early 1970s or Stalin’s Russia in the late 1930s, the place is worth a visit. Admittedly, not many foreigners rush to see the Stalinesque environment, long extinct elsewhere: even though formalities are kept at a bare minimum, only 0.5% of all visitors are foreign citizens.

Looking at the North Koreans present on the scene, one cannot help but wonder what is actually happening inside the heads of these highly privileged people, more often than not agents of the secret police or scions of well-connected families. The crowds of well-dressed, well-fed South Koreans contradict the official picture of the South as an impoverished domain of US imperialists and Japanese neo-colonialists. The selected few probably don’t ask questions, but they arrive at some conclusions no doubt.

However, this impact should not be overestimated. After all, the project was conceived in a way that allowed the impact of the South Korean visitors to be kept as low as possible. The number of North Koreans allowed to see these visitors is intentionally kept very low. Until recently, Pyongyang did not allow the Kumgang project to employ local personnel, and only recently have North Korean waitresses and cooks appeared at some restaurants and in one of the hotels. Their attitude vividly reminds this writer of the privileged Intourist hotel in Leningrad, which had the same air of unintended rudeness in dealing with its foreign guests, and great superiority in interacting with Soviet citizens. Nonetheless, at the Kumgang project, the presence of some 400 North Korean employees (excluding the guides and plain-clothed minders) is significant. However, most of the semi-skilled personnel are ethnic Koreans recruited from China – they agree to work for very low wages.

How will historians see the Kumgang project and the much-trumpeted “intra-Korean cooperation” in general? As a selfish attempt by affluent South Koreans to prolong the existence of a brutal dictatorship in order to save themselves from the troublesome necessity of paying for North Korea’s transformation? Or as an important contribution toward this transformation, a way to slightly open the closed doors of North Korean society and teach its inhabitants a thing or two about the modern economy and modern world? Perhaps they will see it as a way to support the expensive habits of the North Korean elite, or a way to ameliorate suffering of the commoners. We know not, but one thing is clear: business with North Korea is, first and foremost, a political affair, and this is unlikely to change in the foreseeable future.

Posted in Civil society, Labor conditions/wages, Mt. Kumgang Tourist Special Zone, Tourism | Comments Closed

Wish you were here?

Tuesday, April 26th, 2005

BBC
4/26/2005

This week, a top insurance company charted the world’s most dangerous places to do business. Unsurprisingly, regions like Iraq, India and Russia were shaded brown on the “risk map”, marking them as at severe risk from terrorism.

But while most countries were classified as “guarded” risk or above, by Aon, the world’s second-largest insurance broker, it also highlighted, in a calming sage-green, a handful of states dotted round the globe which remain unaffected by the seemingly ever-present terror threat. So where could you go for a relatively risk-free holiday?

NORTH KOREA

It might not be top of the White House’s favourite countries list, but for travellers North Korea is judged to be as safe as houses. Locals, however, have other problems to keep them occupied.

Amnesty International recently documented that the people of this country, which it called one of the most isolated on earth, have been suffering from acute food shortages and famine for the better part of a decade.

Let’s Go travel guides are written by Harvard University students but you don’t need a diploma from that august institution to know that access to the country – described as a festival of weirdness by a Let’s Go competitor – is extremely limited.

South Korean and US citizens can’t even obtain visas, and the UK Foreign Office seems to advise against visiting – without actually saying don’t do it. But like Aon, who gave it a safe rating, the FCO does point out that crime is extremely low and the likelihood of a terrorist attack is also pretty remote.

The British government does, however, recommend extensive travel and health insurance, and tells UK visitors to register with the embassy in the capital city of Pyongyang. It also warns that there has been an outbreak of avian flu.

If that doesn’t put off the most intrepid traveller, there’s this: “Perceived insults to, or jokes about, (North Korea’s) political system and its leadership are severely frowned upon. Foreigners have very occasionally found themselves caught up in criminal cases for not paying what is deemed to be sufficient levels of respect.”

“Oh, I so want to go there,” says travel writer Claire Boobbyer, who documented Vietnam – another very safe country as determined by Aon – for Footprint Travel Guides. “I just love communist countries. I like the fact that it’s so closed, and I’d love to see all the communist memorials, the memorials to the dear leader. It’s just the most closed society on earth, and that appeals to my curiosity.”

Posted in Tourism | Comments Closed

Foreign investors brave North Korea

Tuesday, April 13th, 2004

BBC
Lucy Jones
4/13/2004

“Got any nuclear weapons for sale?” is the response Briton Roger Barrett usually gets when he tells people at Beijing cocktail parties that he invests in North Korea.
The country’s admission to a nuclear weapons programme and its listing on George W Bush’s “axis of evil” means most people are staying well away.

But Mr Barrett, 49, a former troop commander in the British army who has 10 years experience of doing business in North Korea, recently opened a branch of his consultancy firm, Korea Business Consultants, in Pyongyang.

A self-confessed “business adventurer”, he says there is growing interest in the country after Chairman Kim Jong-il introduced economic reforms in 2002.

It’s like China in the eighties… The market reforms are very evident. It’s an exciting time to join the market.

Robert Barrett, Korea Business Consultants
He is also the enthusiastic publisher of what must be North Korea’s only business publication – the DPRK Business News Bulletin – which features some of the 250 companies he advises.

“It’s like China in the eighties… The market reforms are very evident. It’s an exciting time to join the market,” he says.

Mr Barrett is not alone.

Even in the middle of a nuclear crisis there are foreign investors in the country, and their numbers are increasing.

They say North Korea is a mineral rich country that needs everything and insist they have to get there first.

They also believe the 2002 economic reform is for real and that the country is gradually moving towards becoming a market economy.

Poverty

The little data there is on the country’s economy is hardly encouraging, though.

There has been a devastating famine and the UN says malnutrition is still widespread.

There are chronic heating and water shortages, and most North Koreans are paid less than £5 a month.

The country also has an appalling human rights record.

A BBC documentary on the country’s gulags this year contained allegations that chemical experiments are being carried out on political prisoners.

Meanwhile, the US says it is “highly likely” that North Korea is involved in state-sponsored trafficking of heroin.

In the political arena, the second round of six-nation talks aimed at resolving the nuclear crisis ended in Beijing in February without agreement, which means US and Japanese sanctions will remain in place.
‘Communism’ tourism

But the foreign entrepreneurs in North Korea are not put off.

Some are helped by UN employees who have worked in Pyongyang (among the few people to have had contact with the regime there) and many have a track record in China.

Pack a torch, conduct business meetings on the street to avoid big brother listening in and have plenty of “Asian patience” for the endless red-tape, they advise.

An Austrian company is reportedly buying pianos from the North Koreans, a French television station uses North Korean artists to produce cartoons, while a Singapore-based firm is developing forestry and tourism.

The Singaporeans intend to offer “adventure” stays on their North Korean forestry plantations.

Meanwhile, Western tourist agencies are gearing up to offer the last chance to see communism in action, and Fila and Heineken have reportedly entered into sponsorship deals with the North Korean regime.

North Korean labour

A German, Jan Holtermann owner of the computer firm KCC Europe, is putting North Korea online.

He hopes that by being there first he will be able to eventually tap into North Korean computer talent.

The country’s small number of internet users currently dial-up to Chinese providers, a costly process at about £1 a minute.

Mr Holtermann’s customers, who he hopes will number 2,000 by the end of the year, will have unlimited access for £400 a month.

As only a few North Koreans are permitted to have telephones, and as the internet service is costly, Mr Holtermann expects his customers to be government ministries, news agencies and aid organisations.

He has invested £530,000 in the venture, intending to get first pick when North Korean software programmers come onto the market.

“They are very talented,” he says.

“It’s this capacity we want to sell in Europe.”

The parcel delivery company DHL has operated in Pyongyang since 1997, when it was invited there by the government, and now has North Korean light manufacturing, textile and beverage companies on its books.

It sees itself as contributing to the country’s “slow but increasingly visible” economic reform programme.

British consultants

Former bank employee Mr Barrett is convinced North Korea is opening up much quicker than people think.

There are opportunities in banking, minerals, agriculture and telecommunications, he insists.

“There is the odd story of something going wrong,” he says.

“But when you walk around you notice construction going on.

“The people are feeling a change.”

High level contacts

But how to do business with one of the most isolationist regimes on earth?

Contacts are essential, say businessmen.

Though even knowing a North Korean minister is not enough, says Gerald Khor of Singapore-based forestry company Maxgro Holdings.

“You have to go above the ministers to the cabinet. You don’t have to know a member but you need to know people who can influence them,” he says.

“It is very important to get the favour of the dear leader (Kim Jong-il). Because when he says something, it gets done.”

Through a former UN employee, Maxgro got Kim Jong-il’s attention and has invested $2m in forestry, agreeing the state gets 30% of the profits.

“Kim Jong-il is an environmentalist,” Mr Khor says.

“We are confident we’ll get a return.

“We have dwindling supplies and this is high quality wood.”

To locate the forests elsewhere would cost much more, he adds.

Forced to change

Economic reforms introduced by the government in 2002 are seen as the first move away from central planning since the country adopted communism in 1945.

The government has been forced to change in order to survive, especially now it can no longer barter with Eastern Europe and the former Soviet Union, experts say.

“There is no real option not to carry out these reforms,” says UK-based Keith Bennett, who has taken trade missions to Pyongyang.

“But people don’t know where they will lead.

Chinese leaders have impressed on Kim Jong-il that there can be economic reform without fundamental political change.”

Way up on North Korea’s border with Russia and China is the Tumen economic zone, which was established in 1991 with UN help to lure investors.

The project has only had limited success and may indicate the type of problems those investing elsewhere in North Korea may face.

The North Korean section of the zone, Rajin-Songbong, hosts foreign-run hotels, telecommunications and restaurants, but that is about all.

“The North Koreans have sometimes been very co-operative and sometimes not, maybe because of policy change,” says Tsogtsaikhan Gombo, from the UN’s development agency.

“They were also disappointed when they didn’t see the investment.”

Vibrant Chinese economic zones nearby have put up fierce competition.

But even opening the door just slightly to let in capitalism has greatly improved the lives of the 150,000 people living in the zone, says Mr Gombo.

And many foreigners insist that small investments elsewhere in the country may have similar results.

Posted in 1990s Famine, 2002 Economic reforms, Agriculture, Animation, Arduous March, Banking, Cell phones, Communications, Drug smuggling, Energy, Finance, Foreign direct investment, Forestry, Illicit activities, Internet, Korea Business Consultants, Korea Computer Center (KCC), Labor conditions/wages, Light Industry, Manufacturing, Mining/Minerals, Telephones, Tourism | Comments Closed

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