North Korean Economy Watch

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. 

From Yonhap:

Pyongyang cuts off last direct dialogue channel with Seoul: ministry

North Korea has withdrawn all of its government officials from a joint facility with South Korea in its border town of Kaesong this week, cutting off the last direct channel for communication with Seoul, an official at the Unification Ministry said Saturday.

“The North Korean side notified (Seoul) on Friday that some of its representatives at the inter-Korean economic cooperation promotion committee office are withdrawing,” Yang Chang-seok, a spokesman for the Unification Ministry, told reporters.

The spokesman said Pyongyang pulled out its government officials from the joint dialogue office, where nine representatives, including five to six civilian and business delegates from each side, have been permanently stationed to discuss government and business projects between the divided Koreas.

“Therefore, we think we will face difficulties for a while in working-level negotiations between the governments which have been conducted at the economic cooperation promotion committee office,” Yang said.

From Yonhap:

Hyundai Asan withdraws all workers, equipment from N.K.

South Korea’s Hyundai Asan, the North Korean business arm of the Hyundai Group, pulled its workers on Friday from the construction site of a separated family reunion center on North Korea’s Mount Geumgang.

The pullout follows an earlier notification from the communist state that the South Korean workers should withdraw from the construction site before Saturday.

A group of 24 workers returned to the country earlier in the day and an additional 104 workers were pulled out around 5:10 p.m., according to the company.

The withdrawal comes as the first visible sign of soured relations between the divided Koreas after North Korea launched seven ballistic missiles, including a long-range Taepodong-2, on July 5, despite strong opposition and appeals from the South.

Pyongyang said earlier in the week that it was no longer able to continue inter-Korean humanitarian projects, mainly Red Cross-sponsored programs to reunite North and South Korean families separated by the countries’ division.

The announcement came after Seoul said it would suspend humanitarian aid shipments to the impoverished North until the missile crisis is resolved.

North Korea accused the Seoul government of abandoning its northern brethren to please Washington and Tokyo, which spearheaded the passage of a U.N. Security Council resolution condemning the North’s missile launches. The countries are apparently looking to impose additional sanctions.

South Korean Unification Minister Lee Jong-seok dismissed the accusation Thursday, saying the suspension of aid shipments was based on his country’s “own judgment.”
“The reason the government decided to suspend additional food and fertilizer aid was because the North aggravated the situation without considering our position or concerns,” the minister said in a regular press briefing.

The South Korean company, which is also the North’s business partner for a cross-border tour program to the North’s mountain resort, has been working to construct the 12-story separated family reunion center.

North Korea has agreed to allow two South Korean engineers to stay and continue with other business tasks while overlooking the incomplete facility, Yang said.

Another group of 29 Korean-Chinese workers would also be reassigned to the company’s tourism section in the North, according to Yang.

A Hyundai Asan spokesman said Thursday that tours to Mount Geumgang will continue.

The Koreas officially remain in a state of war since the fratricidal Korean War (1950-53) ended only with a cease-fire. More than 90,000 people from the South alone remain separated from their loved ones.

From Yonhap 7/20/2006 (via the Lost Nomad):

N. Korea tells S. Korean contractor to leave site of family reunion center
By Byun Duk-kun

North Korea has told a South Korean company to withdraw all of its workers from the construction site of a separated family reunion center before Friday, one day after it said it would no longer hold reunions of families separated by the division of the Koreas, the Unification Ministry said Thursday.

The one-day notice came in a letter faxed to Hyundai Asan, the North Korea business arm of the Hyundai Group, Yang Chang-seok, a spokesman for the Unification Ministry, told reporters.

“The main point of the letter was for Hyundai to halt its construction of the family reunion center on Mount Geumgang by Thursday and have all of its construction workers leave the site before the end of Friday,” Yang said.

The message was delivered Wednesday shortly after the head of North Korea’s Red Cross society told his South Korean counterpart that his country can no longer hold the humanitarian project to reunite separated families due to what it claimed to be Seoul’s submission to international calls for economic sanctions against the communist state.

Seoul suspended its humanitarian aid for the impoverished North after Pyongyang launched seven mid- and long-range missiles on July 5, despite repeated opposition and warnings from the South and its allies.

South Korea’s point man on North Korea, Unification Minister Lee Jong-seok, said in an earlier press briefing that North Korea’s decision to halt the humanitarian project was regrettable, but that the suspension of aid was not intended to be a sanction or to put pressure on the North.

The decision, according to Lee, was based on Seoul’s “own judgement” that the North has seriously undermined security and peace on the Korean Peninsula by test-firing the missiles despite Seoul’s concerns.

The U.N. Security Council on Saturday adopted a resolution that condemned the North’s missile launches while prohibiting missile-related dealings with the Stalinist state.

Lee said the U.N. resolution must be interpreted “strictly,” a repeat of his opposition against imposing other economic sanctions on the North.

Currently, 150 South Korean workers are working at the North’s mountain resort to build the 13-story reunion facility, according to Yang.

“We are moving toward pulling the workers out,” he said.

The divided Koreas have held 14 rounds of the Red Cross-sponsored reunions between separated families since the historic inter-Korean summit in 2000.

More than 90,000 people from the South alone still remain divided from their loved ones on the other side of the heavily fortified inter-Korean border, according to the ministry.

The Koreas officially remain in a state of war since the 1950-53 Korean War ended only with a cease-fire, not a peace treaty.

From the Joong Ang Daily:

Guarantees for Kaesong

Detailed plans for providing private loans to companies moving to the Kaesong Industrial Complex are being made. Even though the relationship between the two Koreas is in a state of confusion because of the recent missile crisis, several senior officials from big banks and the credit guarantee funds are planning to visit the industrial complex in North Korea.

The administration’s rationale for the visit is to get immediate financial support from the private sector to implement its special loan guarantee program to companies in Kaesong. The banks are certainly willing to give the loans once they have a guarantee certificate from the fund, which is backed by the government. The guarantee fund has nothing to worry about because the government will probably patch up the damage if the companies default on the loans.

Although the funding is considered private capital, it is in effect a loan using tax money as security.

It is not right to support an inter-Korea project through such means. Even if the Kaesong Industrial Complex is a symbol of the economic cooperation between South and North Korea, the competitiveness and the business potential of companies moving to the complex should come first.

The companies should be able to make profits on their own and without any special treatment or support from the government. The banks will be making loans as if they are only hypothetical. They have no intention of giving out loans without the government guarantee. This demonstrates just how uncertain the business potential of the Kaesong Industrial Complex really is.

There is also the problem of getting products made at Kaesong acknowledged as South Korean products. The United States, which is Korea’s most important export market, is not accepting the idea. Without solving this problem, the prospects of the Kaesong Industrial Complex are uncertain.

Giving huge financial support to the Kaesong Industrial Complex at a time when tension in the international community is rising because of the test launch of North Korean missiles sends the wrong signal to the international community. The United States is worried about the cash that the project will generate for North Korea and probably its military programs. This funding is contradictory to the international mood. 

Also from the Joong Ang: Apparently the subsidy-providing agency says it needs a bigger budget!

‘Guarantees’ and ‘North Korea’ sound risky to a state-run fund

As corporate bankers and the Korea Credit Guarantee Fund trek to the Kaesong Industrial Complex today for an inspection visit, the state-run loan guarantor sounds less than happy about its role in funding companies at the North Korean complex.

Last month, the Finance Ministry said the government would give loan guarantees of up to 10 billion won ($11 million) per company to help South Korean companies who have set up plants there.

Several of the big banks here will join the group visiting the complex ― they include representatives from Kookmin, Shinhan and Hana ― and say they are looking for business. “This visit is a step in our preparations for possible financial dealings with the companies there,” said an official at one of the banks who asked not to be identified.

But a credit guarantee fund spokesman seemed to hope that won’t happen under the present ground rules. “We feel the companies at Kaesong present enough financial risk that without special funding from the government, it would be difficult to guarantee all the loans on our own,” he said.

Seoul estimates that about 1.2 trillion won in aggregate will have to be made available to companies operating at the complex; most of them are smaller manufacturers. The program announced by the government on June 16 said the loan guarantees would extend for as long as seven years. So while from the lenders’ point of view any loans would be nearly free of risk, the credit guarantee fund has a different perspective.

“We will do what the government tells us to do,” the fund’s spokesman sighed, “but the government should be responsible [for our losses].”

Seoul has about 7 trillion won available in its Inter-Korean Cooperation Fund, but those funds are spread across many programs, including tourism at Mount Kumgang and funding of both North and South Korean visitors at conferences and festivals.

Fifteen companies have set up plants in Kaesong; 24 more have reserved sites, and Seoul’s ambitious plans call for about 800 manufacturers to set up shop by 2012.

Well, since the ROK has suspended further food/fertilizer aid to the DPRK in response to the current missle situation, the DPRK has suspended family reunions.

From the Joong Ang:

In a tit-for-tat reaction to Seoul’s decision to suspend rice and fertilizer aid, Pyongyang yesterday canceled a separated family reunion and said future ones were in jeopardy.

The Korea Central News Agency broadcast a letter from the North Korean Red Cross to its counterpart in Seoul. The letter said Seoul had refused to talk seriously about a family reunion the North had proposed be held during the Chuseok holidays in October. “Furthermore,” the letter continued, “the South refused to ship rice and fertilizer, one of the inter-Korean humanitarian projects that are conducted on the basis of reciprocity.” Pyongyang, the letter went on, sees no reason to continue family reunions.

“We want to make clear that the video conference call reunion, scheduled to mark August 15, and the construction of a reunion venue at Mount Kumgang will be terminated,” the letter concluded. The Japanese surrendered on Aug. 15, 1945, to end World War II. Both Koreas celebrate a Liberation Day holiday on that date. Although reunions have been held frequently at Mount Kumgang, the two Koreas had agreed to build a permanent reunion site there rather than using tourist hotels.

The Unification Ministry said it would do its best to restart the reunions. It said it anticipated that reaction by Pyongyang but regretted it.

And from the BBC:

The North accused the South of “sacrificing” humanitarian co-operation under pressure from Japan and the US.

Seoul announced the suspension of rice and fertiliser deliveries after inter-Korea talks collapsed last week.

The talks followed North Korea’s missile tests on 5 July, which have raised international concern.

Pyongyang test-fired seven missiles, including a long-range Taepodong-2 believed capable of reaching Alaska.

South Korea says it will not discuss further humanitarian aid with its neighbour until progress is made on resolving issues relating to the missile tests and the North’s nuclear ambitions.

After the high-level talks in Busan fell apart last week, the delegation from Pyongyang issued a statement warning of consequences for inter-Korean ties.

In the latest statement, North Korea’s Red Cross head Jang Jae-on accused the South of “abusing the humanitarian issue for meeting its sinister purpose to serve the outsiders”.

“Our side is, therefore, of the view that it has become impossible to hold any discussion related to humanitarian issues, to say nothing of arranging any reunion between separated families and relatives between the two sides,” he said.

A video reunion meeting scheduled for 15 August would not take place and the planned construction of a reunion centre in the North’s Mt Kumgang was “impossible”, he said.

The reunions bring together families divided by the partitioning of the Korean Peninsula in 1953. The policy has been a key part of reconciliation efforts between the two Koreas.

Earlier, South Korean President Roh Moo-hyun told a meeting of security advisers that Pyongyang’s missile tests were “wrong behaviour” that increased regional tensions.

But he warned against overreacting, saying: “An excessive response to North Korea’s missile tests creates unnecessary tensions and confrontation.”

On Tuesday, the Japanese government said it had begun work on its own set of sanctions for North Korea, in addition to those agreed by the UN Security Council.

The council unanimously passed a resolution on Saturday which condemned the missile launches, but it was softer than the draft initially proposed by Japan.

Japan would look into banning cash remittances to the North from Korean residents, Chief Cabinet Secretary Shinzo Abe told reporters.

But on Wednesday, Japanese Prime Minister Junichiro Koizumi said he would not rush to impose more sanctions.

“We should wait and see for a while whether North Korea will seriously respond to the (UN) resolution,” he said.

Most of the big papers got into Kaesong back in February.  The NY Times got it in July.  Better late than never.  I am adding it to this blog so I can reference it later:

South Brings Capitalism, Well Isolated, to North Korea
By NORIMITSU ONISHI

KAESONG, North Korea — Just north of the demilitarized zone dividing the Korean Peninsula, in possibly the world’s most heavily guarded special economic enclave, 500 managers from the South and 7,000 workers from the North are engaged in a capitalist experiment that is anathema to the United States.

The South Koreans recently gave a tour of the enclave, the Kaesong Industrial Park, to 200 foreign business executives, diplomats and journalists. The hosts expressed optimism that it would bring peace to the peninsula, then they led the visitors through factories churning out goods for markets in the South and elsewhere.

In one of the 15 factories, Taesung Hata, a cosmetics company, about 500 workers wearing dark blue uniforms and white hats operated machines that produced plastic cosmetic containers. Next door, 1,500 workers sat in rows of desks with sewing machines, below ceiling fans and decorative red flowers, making orthopedic shoes called Stafild that were described as “Shoes for Unification.”

To hear the South Korean hosts tell it, when the special economic zone is completed in 2012, it will be bigger than Manhattan, house 2,000 companies and employ 700,000 North Koreans. Yet Kaesong’s significance is larger still, they say, because it will nudge the North toward embracing economic reforms and opening up to the world, the way Shenzhen did in China two decades ago, and open the path, as the shoes suggest, toward reunification.

[The hosts also said they had considered canceling the June 22 tour, which coincided with rising tensions over North Korean preparations for a missile test on July 5, but decided against it.]

Kaesong is South Korea’s biggest project in what some here call unification by “small steps,” or “de facto” unification. The South does not want formal unification for a few more decades, but its strategy is to narrow the yawning gap of half a century of division through various projects, from manufacturing here in Kaesong to uniting the two Koreas’ different Braille characters for the blind and sign language for the deaf.

“It’s de facto unification,” said Ko Gyoung-bin, who oversees the 18-month-old Kaesong project at the Ministry of Unification in Seoul. “It’s already under way. Unlike the German model, it won’t happen suddenly.”

The two Koreas agreed on building Kaesong in June 2002 when the South Korean president at the time, Kim Dae-jung, and the North’s leader, Kim Jong-il, met in Pyongyang. Since then, the exchanges have become so routine that sports authorities on both sides are moving toward fielding a unified team for the 2008 Beijing Summer Olympics.

With cultural, academic, business, political or military exchanges going on between the Koreas nearly every week, 80,000 South Koreans visited the North last year. That did not include South Korean visitors to Kumgang Mountain, a North Korean resort opened to foreigners eight years ago. Kumgang has been visited by 1.25 million South Koreans.

South Korean regional and local governments, regardless of political leanings, have also undertaken projects with counterparts in the North. More than 60 private organizations now send South Koreans north to assist on agricultural, health and other projects.

“We go to North Korea, where we work with our counterparts to show them how to use certain agricultural machines or how to breed better cattle,” said Kang Young-shik, director of the Korean Sharing Movement, a private group that has undertaken the Braille and sign-language projects. “They need help from us, though they also feel the need to compete with us.”

Cho Yong-nam, a director general in the Unification Ministry, said South Korea had projects in 27 of 206 cities and counties in the North. The common theme, he said, is to raise standards in the North so that, in a unified Korea, North Koreans would not constitute “a displaced, misfortunate minority group.”

Companies that have come to Kaesong, which is managed by Hyundai Asan, a private company, have received tax breaks and other support from the South Korean government.

A new highway and railroad traverse the DMZ before reaching Kaesong, about 40 miles northwest of Seoul. Soldiers stand watch on either side of the demilitarized zone, with its barricades, barbed wire fences and land mines.

In working with North Koreans, South Koreans have said, they have encountered the sometimes unexpected effects of their division: North Korean construction workers, for example, were rated only one-third as efficient as their counterparts from the South; many North Koreans, with little experience handling machines, have required extensive training.

Sometimes, South and North Koreans had trouble communicating because the language spoken on either side of the DMZ has changed significantly. (One project supported by the South is a unified dictionary with new words that have appeared, or words whose meanings have changed, since the division of the peninsula after World War II.)

Last year, the activity here expanded trade between the Koreas to more than $1 billion for the first time, though only a few companies here are believed to be profitable.

Kaesong has also become an obstacle in negotiations between South Korea and the United States over a free-trade agreement. The South wants products made here to be included in the agreement, arguing, so far in vain, that most of the materials derive from the South.

The Bush administration, which has tried to isolate the North instead of engaging it, recently criticized Kaesong after long withholding judgment. It accused the South of economically propping up the North, as the United States was financially squeezing the North elsewhere.

In a recent op-ed piece in The Wall Street Journal, Jay Lefkowitz, President Bush’s special envoy for human rights in North Korea, said projects like Kaesong strengthened Kim Jong-il by pumping “hundreds of millions of dollars into the North, with more to come.” Mr. Lefkowitz also said he had doubts about whether the North Korean workers actually got their wages.

Mr. Ko, of the Unification Ministry, rejected such accusations, saying the North Korean workers had to sign their names when they received their wages. The wages average $57 a month, nearly triple the average in the North, he said.

According to Hyundai Asan, employees work 48 hours a week. They were picked by North Korean officials, then approved by South Koreans. About 80 percent are high school graduates.

Visitors were allowed to speak freely to the North Korean workers, but the presence of supervisors and North Korean guides on the tour discouraged anything but innocuous answers.

Peter M. Beck, who is the Northeast Asia director for the International Crisis Group in Seoul and took part in the tour, said that he was impressed by the facilities but that it was still unclear how much of the wages went to the workers.

At Shinwon, a garment manufacturer, 300 North Korean workers were cutting and sewing shirts, dresses and blouses in a large, brightly lighted, air-conditioned factory.

“I’ve seen factories of this type in Kenya, Bangladesh, India and Papua New Guinea, and the conditions here compare very favorably,” said Frank Gamble, a retired banker and an official with the Australia-New Zealand Chamber of Commerce in Seoul, as he toured the Shinwon factory. “What South Korea is trying to do here in Kaesong, we’ve already seen in China and Vietnam and elsewhere. The United States was against investing in Vietnam, but now they’re beating down doors to get there.”

A North Korean official accompanying the visitors expressed anger at criticism from Americans.

“I think they’re ignorant,” he said, refusing to give his name. “They just criticize everybody, including China on human rights. They just want to impose their standards on the world.”

From Google Video:

This is America’s host Dennis Wholey does a great job filming from the Kaesong Industrial complex.

Check it out.

From the Joong Ang Daily:

An abrupt notification by the North that it would not attend caused the postponement of a celebration by the two Koreas of the launch of the Oegeumgang Hotel at Mount Kumgang in North Korea, which had been set to take place yesterday.

The 11-story, 179-room Oegeumgang Hotel still launched operations yesterday, as did Baekseju village, designed to promote rice liquor and a rest stop called Hwajinpo near Mount Kumgang.

The hotel will be open to foreign tourists who come on a Hyundai Asan package deal to visit the mountain.

Hyundai Asan Corp., the arm of Hyundai Group that spearheads inter-Korean business, said yesterday the North told them on Monday afternoon that it would not attend.

North Korea did not say why, but Hyundai said it may have been due to the international tension caused by its missile launches last week.

A Hyundai Asan spokesman said, “the absence is not likely to affect future business with North Korea.”

He added that the opening celebration date will be reset soon after discussions with the North.

Hyundai Asan also plans an event on Mount Kumgang with the North Aug. 4-6 to commemorate the late Hyundai Group founder Chung Ju-yung, who was born in North Korea. The North has not said if it will participate.

Korea Times
Kim Yon-se
Staff Reporter

S-N Economic Cooperation Showpiece Under Double Threat

Nowadays the Kaesong Industrial Complex, the flagship of inter-Korean economic cooperation, is stuck between a rock and a hard place.
The United States has rejected a South Korean request to include it in their bilateral trade talks, taking away one of the few incentives for companies to set up shop there.

The Kaesong complex is a collaborative industrial park developed by South and North Korea located in North Korea close to the Korean Demilitarized Zone with direct road and rail access to South Korea.

The Kaesong complex is also bearing the fallout from Pyongyang’s missile tests that raised an uproar in the international community, giving Washington an excuse to push hard for its ongoing effort to choke the North’s cash flow.

“Kaesong is a lifeline that keeps alive inter-Korean business cooperation,’’ said an official who is involved in the project. “It is at a fragile stage so if anything happens that changes the current status of the Kaesong complex, there would be no turning back.’’

He said that the government is expected to keep the project going at all costs.

In the Kaesong complex, about 7,700 North Koreans work for Hyundai Asan, the project manager and scores of South Korean companies there. A North Korean worker there earns $64 in wages and allowances a month, making for half a million dollars in the monthly total payment. Most of the money is paid on the 10th of the month. This month, it was paid as scheduled.

“It is unthinkable that the wages would be withheld,’’ the official said, when asked what would happen if economic sanctions were slapped on the communist country. “I don’t think that the government would do that.’’

Some U.S. officials have said South Korea’s continuation of pushing Kaesong goods as an item for the FTA talks may be a big hurdle for signing the final pact.

“The agreement should only cover products of the U.S. and the Republic of Korea. That is our position,’’ Assistant U.S. Trade Representative Wendy Cutler told reporters.

Aside from the negative stance toward products created by North Korean employees from the North’s raw materials, the U.S. has strategies not to allow made-in-South Korea products, especially clothes, made from imported materials from China or Taiwan, according to sources.

If the U.S. allows the Kaesong products as an FTA item, it has no choice but to accept the products made from non-Korean textiles.

The U.S. clothing market has already been flooded with cheap products from China and Southeast Asian countries that are labeled as premium brands, such as Polo and Burberry.

Korean civic protestors argue the Korean government is unprepared for the talks and has few negotiation strategies. In fact, the government is falling short in making Kaesong products acknowledged as an FTA item.

According to the Chosun Ilbo, an ultra-conservative vernacular daily, a government official said Korea will ultimately drop the issue in the future talks though it will not scrap the issue on the official negotiation table.

Citing the officials’ remarks, the newspaper said it is impossible for Korea to receive concessions from the U.S. on Kaesong products and the government will use the issue as leverage for other issues.

From the Korea Times:

A group of North Korean officials will receive training on multilateral diplomacy and market economy in Switzerland this summer, a Swiss research institute said Tuesday.

The North Koreans, whose number was not immediately known, are slated to enroll for the training from Aug. 21 to Sept. 22 at the Geneva-based Center for Applied Studies in International Negotiations, center officials said.

The Swiss think-tank, founded in 1979, has been running a short-term training course for North Korean officials every year since 1997. Its program is financed by the Swiss Agency for Development and Cooperation, a governmental body which last year earmarked 5 million franc ($3.1 million) to help North Korea.

In 2004, 14 North Korean officials benefited from the center’s program.

During their stay in Switzerland, they visited the European Union, headquartered in the Brussels, Belgium, and met with members of the European Parliament in Strasbourg, France.