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 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.

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.

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 Joong Ang Daily:

One ROK official said yesterday that shipments of 100,000 tons of fertilizer and 500,000 tons of rice, the remainder of assistance promised this year, would be suspended at least temporarily.

“There should be no misunderstanding on this,” the official said. “We told the North that actions would be taken if they fired a missile.”

Other projects, such as manufacturing at the Kaesong Industrial Complex and tours to the resort area of Mount Kumgang, will probably not be touched. Mr. Lee, the Unification Minister, said the two projects had long-term goals and involved private capital, and so were not appropriate instruments of retaliation.

Joong Ang Daily
Kim Hyung-soo
7/6/2006
 
However concerned politicians may be about North Korea’s missile test, many Korean companies that deal with the reclusive state are saying it has had minimal impact on business. So far.

Hyundai Asan, which does much of its business in North Korea ― including the Mount Kumgang tour and operating the Kaesong industrial complex ― said it was business as usual. Hyundai Asan said only 50 people canceled their trip to Mount Kumgang yesterday, while 700 people went as planned.

“As the government has already mentioned, private businesses are not subject to restrictions because of the North Korean missile problem,” a Hyundai Asan official said.

The South Korean company stressed that although it has faced problems in the past because of developments in the North, its businesses there have never been forced to stop.

“Business in North Korea should be consistently maintained, as it could be a solution that could solve the strained relationship between the two Koreas,” the official said.

Hyundai Asan said they were more concerned that the North’s recent actions could end up reducing the number of tourists in summer, the high season for travelers.

ShinWon, which manufacturers clothing at Kaesong industrial complex, said the plants there were operating as usual.

“The only difference was that our headquarters in Seoul called to ask what the atmosphere was like in Kaesong,” said a South Korean ShinWon worker at Kaesong.

Despite the firms’ apparent sangfroid, experts were quick to point out the possible long-term consequences. “[The launch] could reduce the credibility of the Korean economy and affect foreign investments,” said an official at the Korea Chamber of Commerce and Industry. “The future of economic cooperation between the two Koreas has become more uncertain.”

“Poor security is the economy’s biggest negative factor,” said Lee Dong-eung at the Korea Employers Federation. “At times like this society needs to remain calm and unified.”

Though many foreign investors who visited Kaesong last month stressed that politics and business should be kept separate, it remains to be seen how the missile launch will affect foreign sentiment toward the industrial complex. 

Yonhap
7/4/2006

South Korean companies will be able to make remittances to their operations in an industrial complex in North Korea without having to make a prior report to the authorities in Seoul, the Finance Ministry said Tuesday.

The ministry said it has amended regulations governing remittances to North Korea to help South Korean companies operating in the inter-Korean industrial complex in Kaesong, just north of the heavily-armed demilitarized zone that divides the two Koreas.

Financial remittances to North Korea had previously needed to be reported to the Bank of Korea, South Korea’s central bank.

According to the ministry, a branch of South Korean lender Woori Bank that is located in the industrial complex will serve as the intermediary bank.

A total 13 South Korean companies are currently operating in the industrial complex, a key product of the 2000 summit between the leaders of the Koreas that boosted reconciliation and cooperation programs involving the two countries.

The number of South Korean companies in Kaesong is expected to reach 300 when the first phase of construction is completed next year. Seoul believes the industrial city will be able to house as many as 2,000 South Korean firms by 2012 when the complex is fully developed.

From Joong Ang Daily:
June 26, 2006

KAESONG ― Even in the sweltering heat of a June afternoon, hundreds of hands were moving diligently, cutting and pasting on production lines of a factory floor that seemed just like any other.

But this plant was no ordinary capitalist factory: Workers here wore Kim Il Sung buttons and were laboring in the workers’ paradise of North Korea, one of the few remaining militant communist countries in the world.

Last week about 100 foreigners representing some 70 companies got a first-hand look at the Kaesong Industrial Complex, a North Korean industrial park fueled by South Korean capital and mostly North Korean labor.

As Kim Dong-keun put it, Kaesong was a hot battlefield during the Korean War but is now a symbol of inter-Korean reconciliation. Mr. Kim is the head of the complex’s management committee.

The Korea Trade-Investment Promotion Agency and Hyundai Asan organized the investment program. According to officials from the South Korean organizers, this was the first opportunity for a large group of potential foreign investors to get a look at what was there.

The group toured three South Korean factories; Taesung Hata, a cosmetic package manufacturer; Samduk Stafild, a shoe manufacturer; and ShinWon, a fashion outerwear manufacturer.

The Kaesong Industrial Complex is amazingly close to the Demilitarized Zone, a 60-year-old relic of wars hot and cold. The complex, which is still far from completion, is visible from the immigration office at the North Korean edge of the DMZ.

The mountains surrounding the complex were almost naked. “The trees were cut as a military strategy to observe enemy movements,” a South Korean blue-collar worker for Hyundai Asan said. “But it also seems that the North Korean people cut trees to use as firewood.”

The modern industrial site was a stark contrast to its surroundings, where farmers were plowing paddy fields with oxen, a sight that has vanished from rural areas south of the DMZ. The complex was fenced off with barbed wire. “It was necessary to separate the industrial complex from the general population because many North Koreans could sneak in and take away raw materials,” a Hyundai Asan official said.

The new plants were well air-conditioned. As many foreign investors on the tour commented, the workers were well-organized. The only sound to be heard in the factories was that of the machinery. The workers did not even glance at the unusual visitors, and trying to get a hint of a smile or a friendly nod was impossible. Even the South Korean workers at Kaesong were very careful in their actions. Some advised journalists against taking pictures of North Korean workers, because it might cause problems.

The only North Korean who spoke to the visitors, other than the inteperter, was a man who criticized U.S. intervention in North Korean human rights issues.

“If the United States keeps raising the issue of human rights,” he said, “there is a huge chance that we might not let their companies such as Pentium enter the Kaesong Industrial Complex.” He evidently was referring to Intel, which makes Pentium computer central processor chips.

An official of Taesung Hata, who said he had been living in Kaesong for a year, noted that the most challenging part of his job was that the workers in North Korea have no concept of factory work. Living in a non-capitalist society, he said, they were untrained to use machinery.

The South Korean said it took some time to train the North Koreans even to use western-style bathrooms. “They were squatting on top of the seats,” he said.

The trip came during a time when tension was rising in the global community over North Korea’s missile launch preparation.

But most of the touring businessmen said security issues didn’t bother them. Business was business, they said, and should be dealt with differently than politics. “Investors tend to take the longer view,” said Charles Henry of Tupperware.

John Boynton, Doran Capital Partners’ chief executive officer, said cooperation was better than distrust and that he didn’t think Kaesong had any serious security concerns to worry about, but he was speaking of physical security at the site. “Look around the world,” Mr. Boynton continued, “the World Trade Center, London ― Spain is as dangerous as Kaesong is.”

Jean-Daniel Rolinet of Samsung Thales, a defense contractor, said he had been worried that the missile tensions would cause the trip to be canceled. “I’m glad we’re here,” he said; the tour made him realize the quality of the work being done there.

“I would recommend Kaesong to the French community,” Mr. Rolinet said.

Whether for the ears of journalists and the tour organizers or out of real conviction, many other foreigners in the group said they were positive about Kaesong and would invest there. Labor costs seemed to be the biggest attraction. North Korean workers at the site receive $57.50 per month on average, pay that can rise to $70 per month with overtime. But those wages, a Hyundai Asan official explained, are paid to the central government, not to the workers.

Pressed about when those investments might arrive, however, most said it would be far in the future. “Kaesong Industrial Complex is surely impressive,” said Gordana Hulina, a risk manager at ING Bank, “but it is clear that Kaesong is for the most part a Korean-based project.”

One foreign investor said she thought most of her companions were there just out of curiosity, to see a country that is for the most part closed off to them.

Most of the visitors refused to comment on the U.S.-Korea free trade negotiations, where Korea is pushing to have goods produced in Kaesong treated as South Korean goods. The United States says it cannot accept that proposal.

Several visitors seemed hesitant, however, about the project’s future, citing policy inconsistencies in North Korea and the dearth of information about the nation.