From the Korea Herald:
North Korea has demanded a change in its business partner for tours to Gaeseong and has been banning South Koreans from entering the border town since the beginning of this month, Seoul government sources said yesterday.
The Gaeseong tour has been a source of dispute between the two Koreas since the North demanded last year that its current partner, Hyundai Asan Corp., be replaced with Lotte Tours Co.
Since last May, the North has delivered messages on three different occasions saying that it has “decided to operate the Gaeseong tour with Lotte Tours Co.,” the Seoul government sources said yesterday.
In what Hyundai Asan calls a breach of contract, the North asked Lotte Tours between August and September last year to launch a tour program to Gaeseong, a city near the inter-Korean border rich in historical attractions. The North said it could no longer discuss the tour with Hyundai Asan. Lotte did not respond to the proposal.
Lotte Tours Co. is South Korea’s third-largest travel company.
At the end of last month, Pyongyang sent an invitation to Lotte to visit North Korea, the sources said. Lotte requested permission on July 5 for the visit but Seoul denied it following the North’s test-firing of seven missiles the same day.
Since the 1990s, Hyundai Group has exclusively led North Korean tourism projects.
However, Hyundai recently fell out of North Korea’s favor after it sacked chief executive of Hyundai Asan, Kim Yun-kyu, over allegations of embezzlement last year. Kim had been Hyundai’s point man for North Korean businesses following the death of Hyundai Group founder Chung Ju-young, who paved the way for economic exchanges with the reclusive state.
But conflicting positions over the price of the tour are the real reason behind North Korea’s refusal to work with Hyundai Asan, some sources suggested.
During a pilot tour program for Gaeseong conducted by Hyundai Asan between the end of August and early September last year, North Korea reportedly wanted as much as $150 for every tourist, almost 10 times it charges to Mount Geumgang on the east coast.
Hyundai Asan refused the price, saying it would never break even.
Seoul said yesterday Hyundai Asan remained the official partner for all tour projects with North Korea.
“The North wants to change partners unilaterally, but the Seoul government’s approval of (Hyundai Asan as the main partner) for the Gaeseong tour remains valid,” a government official said.
Lotte has also acknowledged the present situation and decided not to participate in the Gaeseong tour unless the contract between Hyundai Asan and the North is fully sorted out, the official said.
It is Seoul’s position that it cannot overturn its original approval for Hyundai Asan, but that it could be possible for Lotte to sign a separate contract with the North.
Observers said it could thus be possible for Hyundai Asan and Lotte to join hands in the tour business.
One of the alternatives could be for Hyundai Asan to remain as the main business partner but to pass actual operation authority to Lotte Tours. The Seoul government is positively considering the option as well, sources said.
In a letter to South Korean Unification Minister Lee Jong-seok last month, the North Korean representative for inter-Korean tour projects said that it would ban South Koreans visiting the inter-Korean Gaeseong industrial park from entering the streets of Gaeseong. The industrial complex sits on the outskirts of the border town.
Observers said the entry ban is considered to be North Korea’s pressure on the South to allow Lotte to replace Hyundai Asan.
Hyundai Asan and the North signed a $500 million deal in 2000 for the exclusive rights to seven economic programs, including tours to Gaeseong.
The Seoul government consequently approved Hyundai Asan to be the official tour business partner for Gaeseong in March 2003.
Upon North Korea’s first request in August, Lotte Tours Co. said it will not pursue a tourism business in Gaeseong unless North Korea cleared terms with Hyundai Asan Corp.
By Lee Joo-hee
From the Korea Times on 7/21/2006:
North Stops Kaesong Tours
By Lee Jin-woo
North Korea has banned South Koreans from visiting Kaesong, a city near the inter-Korean industrial complex claiming it wants to replace Hyundai by Lotte as a new partner for arranging tours of South Koreans to the capital of the ancient Korean kingdom.
The Unification Ministry downplayed the shutdown, saying it is unreasonable to link the gridlock of the tourism project to the recent missile crisis.
“North Korea brought up the issue months ahead of the present disputes involving the missile launches on the Korean Peninsula,’’ Kim Chun-sig of the ministry told reporters yesterday.
He said Pyongyang has asked the South three times since May to accept Lotte in place of Hyundai Asan, a North Korea-related business arm of Hyundai Group.
“We believe the contract signed between the North and Hyundai is still effective and legally binding unless the two sides agree to nullify the deal,’’ he added.
He said Unification Minister Lee Jong-seok has asked Lotte Tour Chairman Kim Ki-byung not to get involved in the inter-Korean business during their meeting on June 30.
Lotte has made it clear that it would not join the project unless Hyundai-Asan drops the project.
Hyundai has already arranged three trial tours to the ancient city. However, last October, the North Korean committee abruptly announced it would not initiate the program with Hyundai-Asan, only two months after the sides signed a contract.
The relationship between the two sides turned sour after Hyundai Chairwoman Hyun Jeong-eun dismissed Hyundai-Asan CEO Kim Yoon-kyu. Kim was accused of diverting millions of dollars in corporate funds to an undisclosed source.
In addition, the North wants a payment of $150 per tourist to the city, nearly 20 times more than the $20 Hyundai Asan pays to North Korea for every South Korean traveler to Mt. Kumgang. Hyundai has been reluctant to accept the North’s request.
On June 22, the North announced that from July 1 it would not allow South Korean visitors to the industrial complex to visit the city’s downtown area that includes historic sites.
Hundreds of South Koreans, mostly businesspeople and government officials, have been allowed to visit the city during their visit to the industrial complex.
“In a letter, North Korea’s Asia Pacific Peace Committee said no South Koreans will be allowed to visit the city from July 1,’’ Kim said. “We’ve decided to kept it confidential as we wanted to handle the issue during the South-North ministerial talks that ended poorly in Pusan earlier this month.’’
The director added it is technically incorrect to say the “Kaesong tourism project came to a halt or became suspended’’ as there have been only trial tours to the city.
The communist country test-fired seven missiles earlier this month, including one believed to be capable of reaching parts of the United States.
It also said Wednesday that it would halt family reunions of relatives split by the heavily fortified Korean border after the South refused to discuss aid at recent high-level talks.
