North Korean Economy Watch

This story from the Daily NK has an update on whats happening at Raijin as well as a history of the area:

Read whole story here:

In December 1991, Rajin and Seunbong cities were declared “Free Trade Economic Regions”, Rajin Port was planned to be expanded according to a 3-stage development scheme. The first stage consisted of infrastructure construction such as railroads, roads, and ports.  In the ten years since, the budgetary outlays have been insufficient.

In 1996, the Committee for Promoting NK Foreign Economic Cooperation published a report, “Reality and Outlook for Rajin- Sunbong Free Trade Economic Regions.” According to the report, the Rajin Port should first build capacity for large-sized containers.  In stage two, its loading-handling capacity should be improved from 300 million tons to 1,700 million tons.  The third stage, beginning in 2010, the port should have the capacity to manage 100 million tons.

From the Washington Times:

South Korea plans to open a job training center in the North to improve the skills of North Koreans who work in South Korean-owned companies. 

The training center, to open in June, each year will offer training in 13 areas of work to 4,000 employees of midsized companies, the state-funded Human Resources Development Service of Korea said in a statement.

“The center will conduct job training and supply a quality workforce to our companies which will move in the Kaesong Industrial Complex,” it said.

South Korea’s government has allocated $16.4 million to construct the training center in the industrial zone, The Korea Herald reported Thursday. 

Currently, 11 South Korean companies employ 6,000 North Korean workers and 600 South Korean workers in the zone, according to the Ministry of Labor.

The ministry expects that some 300 firms will eventually recruit 90,000 North Korean workers when the first-stage development of the inter-Korean complex is completed in 2007, the newspaper reported.

from Bloomberg:

North Korean workers stitching Made in Korea labels on $150 sneakers may hold the key to a $29 billion free-trade agreement between the U.S. and South Korea, the biggest U.S. accord in a decade.The 6,000 North Koreans, working 48-hour weeks for 1/20th of the pay of their southern colleagues, are churning out pots, sneakers and clothes in a South Korean-funded business park just north of the demilitarized zone that separates the two Koreas.

South Korea’s government is counting on free-trade status to help lure local and overseas companies to the park near Gaeseong, an ancient capital of united Korea. The U.S. says goods made north of the DMZ won’t qualify for special treatment.

“The free-trade agreement must be expanded to include Gaeseong products,” said Kim Dong Keun, chairman of the park’s management committee, in Gaeseong. “I understand that nothing has been set in stone. The matter is still up for negotiation.”

At stake is an accord forecast to boost U.S. exports by $19 billion and lift imports from South Korea, the U.S.’s seventh- largest trading partner, by $10 billion. Talks may start as soon as this month.

The U.S. last year exported $29 billion of goods to South Korea and bought $43 billion of Korean imports, according to the South Korean Ministry of Foreign Affairs and Trade. The U.S. is the country’s third-largest trading partner.

“The starting point is that an FTA applies to goods originating in the U.S. and the Republic of Korea,” Alexander Vershbow, the U.S. ambassador to South Korea, said at a seminar with economists in Seoul on Feb. 14. “How Gaeseong is treated under the free-trade agreement is going to be a complex issue.”

Europe Waives Duties

South Korean Trade Minister Kim Hyun Chong said at a Feb. 2 press conference with U.S. Trade Representative Rob Portman in Washington that his government expects goods made in Gaeseong to be part of the trade deal. Portman said the agreement would only cover goods produced in South Korea.

“This is a negotiation between the United States and the Republic of Korea,” Christin Baker, Portman’s spokeswoman, said March 2. “Its provisions will apply to goods originating within the territories of the two parties.”

Singapore on March 2 implemented a free-trade agreement with South Korea that eliminated tariffs on all goods, including those from the North Korean industrial zone.

The European Free-Trade Association waives duties on Gaeseong goods if more than 60 percent of the product is sourced from South Korea.

Delayed Plans

At Gaeseong, Moon Chang Seop, president of South Korean shoemaker Samduk Stafild Co., is delaying his expansion plans until the U.S. talks end.

Moon’s company is among 15 South Korean enterprises to have opened factories in the zone since June 2003. He’s hoping to shift all of his $50 million annual production from the southern city of Busan.

“It all depends on whether the U.S. can accept products made in Gaeseong as South Korean-made,” said Moon, 55, as North Korean music played to rows of uniformed seamstresses in his factory. “If the U.S. won’t budge, I won’t be able to move our main plant.”

Seoul-based Hyundai Group, which controls the world’s largest ship-builder, began developing Gaeseong after a landmark summit in 2000 between then South Korean President Kim Dae Jung and his northern counterpart, Kim Jong Il.

The 10-hectare (25-acre) park borders Gaeseong city, the capital of Korea’s Goryeo kingdom from 918 to 1392. It’s ringed by a 2-meter-high (6.5 feet) fence and guarded by North Korean soldiers armed with pistols and semi-automatic weapons.

More than 300 trucks cross the heavily fortified demilitarized zone every day, carrying in raw materials from the South and carting off finished products. Gaeseong is an hour’s drive from both Seoul and Inchon, the nearest South Korean port, and two hours from Pyongyang.

Golf Course

The South Korean government is spending $220 million to expand the site to 330 hectares by 2007, with 24 new tenant companies already building plants.

By 2012, factories will cover 26 square kilometers (10 square miles), according to the Gaeseong committee. It plans to build a supporting urban area of 40 square kilometers, including a 36-hole golf course.

About 730,000 North Koreans, or almost 3 percent of the communist nation’s population, will be housed there by then, said Kim, the committee chairman.

South Korean companies are paying the North Korean government $57.50 a month for each worker, according to Kim. Of that, North Korea collects at least $7.50 in what it calls a social tax.

By comparison, the average monthly wage for factory workers in the South is more than $1,000, according to Hyundai.

Gaeseong isn’t the only obstacle to a trade accord that may be the biggest negotiated by the U.S. since its 1994 North American Free Trade Agreement with Mexico and Canada.

Agriculture, Autos

U.S. officials also will push South Korea to cut trade barriers in agriculture, auto, pharmaceutical and services industries, according to a Feb. 9 report by the research department of the U.S Congress.

South Korea last month reduced quotas on Korean movies to allow more U.S. films to be shown in cinemas and lifted a two- year ban on U.S. beef imports, paving the way for talks to start.

It also agreed to accept some U.S. auto imports, temporarily exempting them from emission rules that are tighter than U.S. federal standards.

U.S. Trade Representative Portman and South Korean Trade Minister Kim said on Feb. 2 that both parties aim to sign an agreement by the end of this year.

At Gaeseong, Oh Sung Chang, the senior managing director of South Korean package maker Taesung Hata Co., is biding his time.

Taesung Hata, which makes cosmetics cases and casings for brands such as Stila, Bobby Brown and Shiseido, plans to quadruple its initial $14 million investment in Gaeseong in the next few years, Oh said.

“Of course, the outcome of the trade negotiations may influence our decision,” he said, as North Korean workers assembled compact-powder casings in the Taesung factory. “We await a favorable outcome.”

From the Standard (China) and LA Times:
3/2/2006

The Kaesong industrial park is only an hour from Seoul but it’s like traveling to the moon, writes Barbara Demick
It takes barely an hour to drive from downtown Seoul to the other side of the demilitarized zone, but the culture shock is such that you might as well be commuting to the moon.

Mobile phones, books, newspapers, magazines, videos, laptops, MP3 players and many other appurtenances of 21st-century life must be checked on the south side of the border.

Also best left behind are any wisecracks about the North Korean regime, or in particular its leader, Kim Jong Il.

“You’ve got to watch what you say,” said Kim Yi Gyeom, a South Korean telecommunications worker standing in a long line of Monday-morning commuters waiting to go north. “The spirit of openness has not come to North Korea yet.”

In the boldest experiment to date with inter-Korean cooperation, nearly 500 South Koreans are working side by side with more than 6,000 North Koreans in a year-old industrial park just north of the DMZ.

South Koreans are assuming all the financial risk, having invested more than US$2 billion (HK$15.6 billion).

The South would like to reduce political tensions and reap the benefit of inexpensive North Korean labor so its manufacturers can compete with China.

For the North Koreans, the Kaesong experiment is a way to build its economy with only the most limited dose of openness to the outside world. But the political risk is all for the North Korean government, which fears that contact with the better-fed, better-clothed South Koreans could endanger its grip on power.

“It is natural that there is a culture gap,” said Hwang Boo Gi, director of the Kaesong Industrial District, who led a group of foreign journalists through the park Monday.

“We are talking about the difference between capitalism and socialism.”

Or as a North Korean official, Han Cheol, said diplomatically, “We like to emphasize what we have in common, like our heritage, and not our differences.”

Nevertheless, the contrast is particularly glaring when coming from Seoul, the high-tech, neon-lit capital of the world’s 12th-largest economy, a mere 58 kilometers away. Around the industrial park, which lies outside the center of the city of Kaesong, there is little but desiccated rice paddies and yellow hills denuded long ago by people scratching for firewood. Nearby is an abandoned agricultural college, its crumbling facade decorated by a faded red sign trumpeting the achievements of the North Korean Workers’ Party. Scrawny goats graze outside two-story white- washed houses with windows made of plastic sheeting.

The industrial park itself is surrounded by 8km of perimeter fencing and poker-faced, rifle-toting North Korean soldiers.

Inside the fenced compound everything from the toilets to the machinery are South Korean-made, mostly the latest, state-of-the-art models. Although all 11 companies now operating in the 9.31-hectare pilot project are South Korean, the North Koreans keep a tight rein over the work environment. No South Korean money is accepted here, even at a Family Mart convenience store set up for the exclusive use of South Korean employees.

North Korean patriotic music in praise of Kim Jong Il blares over the loudspeakers of a futuristic warehouse where North Korean women in crisp royal blue uniforms stitch athletic shoes using brand-new sewing machines.

The monthly salaries of US$57.50 for each North Korean worker – regardless of position – are paid directly to the North Korean government, which in turn gives the workers about US$8, more than double the average monthly salary. South Korean companies have asked repeatedly to pay the workers directly and to give bonuses for better work, but have been refused.

Even New Year’s gifts such as extra food and warm clothing could be given only after elaborate negotiations to make sure everybody was getting the same.

South Koreans, many of whom live for weeks at a time in modular housing in the complex, have their own cafeteria and their own medical clinic, all off- limits to North Koreans.

Last year, stories appeared in the South Korean media about a purported Romeo-and-Juliet romance between a North Korean woman and a South Korean man. But people at Kaesong said the story was apocryphal because the North Korean women are never alone.

There have been countless cases of culture shock. When Shinwon held a fashion show in October – complete with disco music, strobe lighting and slinky models in denim mini-skirts – it offended the conservative sensibilities of some North Koreans.

For their part, some South Koreans were taken aback recently to see the North Koreans workers dancing and singing enthusiastically to an accompaniment of accordion music at a fuel- pump factory. It turned out they were rehearsing in anticipation of Kim Jong Il’s birthday on February 16.

As is often the case, many misunderstandings resulted from acts of kindness.

South Koreans have tried covertly to give medicine from their private clinic to ailing North Koreans.

One South Korean employee was accused of trying to bribe a North Korean soldier when he gave him two packages of instant ramen noodles, according to a military source.

In a more serious incident, a South Korean was caught trying to distribute Christian literature, which is strictly anathema in the communist country, the source said.

“Almost every day something happens, some small quarrel or misunderstanding. But because Kaesong is so important to Kim Jong Il, the North Koreans choose to ignore it,” said Lim Eul Chul, a scholar at South Korea’s Kyungnam University who has written extensively on Kaesong.

Both sides have ambitious plans for Kaesong. When fully completed in 2012, the enclave is supposed to encompass 64.75 square kilometers and employ 700,000 workers.

The biggest impediment to the project’s success might be North Korea’s ongoing nuclear weapons program and its hostility to the United States. The tensions have limited the nature of the products manufactured at Kaesong to low technology – with anything having potential dual use for military purposes prohibited – and mostly confined sales to the domestic market within South Korea.

Although Shinwon Apparel, for example, supplies clothing to Kmart and Wal-Mart, among others, those garments are largely produced in Vietnam. US officials, who earlier this month announced negotiations toward a free- trade pact with South Korea, have said they would not consider Kaesong products to be labeled “Made in South Korea.”

With no progress on the horizon in its long war of nerves with the United States, the North Koreans have no choice but to chum it up with South Korea. If they are merely holding their noses and tolerating the presence of the South Koreans for their money, they go to pains not to show it.

The well-disciplined North Korean cadres who were showing foreign reporters around Kaesong Monday all lavishly praised their South Korean counterparts.

From the JongAng Daily:

The government is being criticized for easing conditions on loans funded from the inter-Korean cooperation funds that were given to the Korea National Tourism Organization for Mount Kumgang tour projects. On Monday, the government decided to lower the interest rate on a loan given to the organization in June 2001 by 2 percent.

The organization originally received a loan of 90 billion won ($93.7 million) with an interest rate of 4 percent and repayment over a five-year period, after a three-year deferment. However, the payback period has now been extended to 10 years at an interest rate of 2 percent.

The Unification Ministry said yesterday that the organization asked the government to make changes to the conditions of the loan, arguing that under the tours’ current profit structure it was unable to repay the funds. This request was acceded to.

The ministry said that after an accounting firm had reassessed the loan, the decision was made with all relevant government organizations involved agreeing to make changes to its conditions.

Nevertheless, the argument that the profit level is too low for the organization to make its payments seems weak as the number of tourists taking trips to the North’s Mount Kumgang has increased over the years.

Only 57,000 people made the trip in the year the loan was granted but by last year the number of visitors had increased to 301,000.

The organization paid the 90 billion won to Hyundai for operating rights to the Kumgang hot springs and resort. Hyundai made a payment of 29 billion won to the North, for which it had been in arrears.

In response, some civic groups argued that public funds should not be used to finance such projects in the North.

You know you have arrived when you are covered by the Washingon Post:

Two Koreas Learn to Work as One: New Industrial Park Matches South’s Capital and Know-How With North’s Low-Cost Labor
By Anthony Faiola, Washington Post Foreign Service
Tuesday, February 28, 2006; Page A10

Here are the highlights:

Layout

• Kaesong Industrial Park is two-thirds the size of Manhattan.  Only a fraction of its real estate currently developed.  15 factories already operating. One is called Shinwon Textile Factory. (Source)
• A South Korean telephone company has installed the first 340 of 10,000 planned phone lines.  Because of the communist state’s chronic shortages of electricity, the South Koreans have had to run power lines across the border to serve their factories.  The goal (starting next month) is 154000 kilowats (source).
• Some company representatives concede that the North Koreans are not always ideal business partners.
• A tall green wire fence marks the zone’s 8.6-kilometer-long boundary (Source)
• South Korea is assuming all the financial risk, having invested more than $2 billion  (source). Kim Dong-keun, president of the South Korean Committee, which co-manages the zone, says the 489 South Koreans who work in Kaesong receive special training on interacting with North Koreans.   For South Korean managers, Kaesong is considered a hardship posting.  As a result, many of them receive as much as $2,500 extra pay per month (Source). No South Korean money is accepted here, even at a Family Mart convenience store set up for the exclusive use of South Korean employees (Source).
• 50 year leases were auctioned off last summer. On Average, there were 4 South Korean companies vieing for each spot. 

Labor Relations and Statistics

• After the first busloads of North Korean workers arrived at the gates 16 months ago, weeks passed before people from the two societies could even understand each other’s dialect.  They had to explain virtually every aspect of modern life to his fresh-faced communist charges — down to how to use the factory’s Western-style toilets.
• The workers put in long hours at often grueling tasks, but life here nonetheless seems a cut above the poverty that is common in most of North Korea. 
• Although the zone currently employs about 6,000 North Koreans here, officials in Seoul project that an additional 15,000 North Koreans will start work as more than 20 South Korean companies move in. By 2012, plans call for as many as 700,000 employees — 4.5 percent of North Korea’s entire workforce.
• Thousands of workers live in on-site dorms, while others arrive by bus from Kaesong. South Koreans are not permitted beyond a bright green perimeter fence that is guarded by armed soldiers and separates the complex from nearby towns.
• North Korean workers are paid a fixed salary of $57.50 a month. That is about 20 times less than the pay of a South Korean worker of the same skill level, but it is a welcome sum in North Korea.  It is unclear how much of that money actually goes to the North Korean workers. The dollar-denominated checks issued by the South Korean companies are paid to a North Korean government agency. Na Un Suk, director general of North Korea’s Central Special Economic Zone Control Agency, said the government makes deductions for room and board provided to the employees before paying them varying amounts in North Korean currency.  The Los Angeles Times reports that workers get $8/month.  About double the average salary (Source).
• Although South Korean managers have some say in promoting workers, they have little role in choosing who arrives on their doorstep. Many employees are from Kaesong city — the ancient capital of the Goryeo kingdom that first united much of the Korean Peninsula. But all are picked by officials from the North Korean government.
• North Korean workers are forbidden from any contact with South Koreans except when necessary on the job.  They enter and leave the zone through a single checkpoint manned by North Korean soldiers. (Source)
• Managers from South Korea live in single-story temporary quarters that resemble military barracks. Typically, they go home twice a month.  “It’s very difficult,” says Kim Ki Hong, general manager of a branch of the only South Korean bank in the zone. “We cannot go outside,” says Mr. Kim. “We are almost prisoners.”(Source). Southerners also have their own cafeteria and their own medical clinic, all off limits to the North Koreans (Source). 
• In response to queries about their wages, a young North Korean woman murmurs, “I cannot say anything,” and another says only, “We get enough.”
• Everyone here has at least a high school education. Many of them are college grads. But the most convenient is the fact that they all speak Korean. It’s easier to train them,” said Ryu Nam-Ryul, a section manager at Taesung Industry
• North Korean patriotic music in praise of Kim blares over the loudspeakers.

Taxes

• Gaesong has also exempted foreign companies from corporate income taxes in the first five years, and gives a 50 percent reduction for three more years. (source)
• Independent labor unions are banned.

Production

• Taesun Hata is exporting compact casings for Clinique and eye shadow holders for Bobbi Brown from its multimillion-dollar plant.
• Southern companies make shoes, textiles, auto parts and kitchen implements
• A branch of a major South Korean bank is open for business, as is a Family Mart convenience store staffed by two North Korean women.
• Inter-korean trade surged 50% since last year, over $1 billion.

Political goals

• The Zone is also key to South Korea’s strategy for lessening what is bound to be a massive economic jolt if it reunites with the North. North Korea’s per-capita income is roughly $1,800 a year, 10 times less than the South’s.
• Officials say Kaesong is also meant to keep on course a program of market-oriented restructuring that the North is undertaking in its domestic economy.
• South Korean companies have received low-interest loans and security guarantees from the South Korean government to locate in Kaesong.
• South Korea no longer has to go to south east Asia for manufacturing.  they can undertake low-cost production in North Korea and undercut Chinese prices.(Source).  It takes only three hours to deliver the products from Gaesong to the South Korean warehouse, whereas it would take more than one week from China.(source)
• “Our workers here are not motivated by material satisfaction. We are motivated by the fact that this is a national business project. We are one nation, and this is an important part of our unification process,” Na Un-Suk, director general of the Central Special Economic Zone Control Agency.

Future plans

• South Korea’s state-run Korea Land Corp. and Hyundai Asan, the North Korea business arm of Hyundai Group, said Tuesday they plan to build a hotel at an industrial complex in the North by June next year. The two companies will invite a private enterprise to construct the hotel to resolve a shortage of accommodation at the complex in the North Korean border city of Kaesong.  To that end, the state land developer and Hyundai Asan will set up a joint venture to take charge of the hotel, they said. (Yonhap)
• To grow as planned, the park will have to win access to world markets. South Korea hopes that products made here will be eligible to enter the United States under any free-trade pact that may be negotiated with the United States (Source).

According to the Korea Times, 02-10-2006, the Kumgang tourist zone is being expanded.  Here are some stats:

• The Extended tour zone will reach Wonsan (Where the Japanese Chongryun ships come in)
• There are plans to finalize a “master plan” of development for the area (lakes, nursing homes, beaches).
• Since opening in 1998, 1.2 million south Koreans have visited
• Hyundai Asan hopes to channel 2.3 trillion won ($2.37 billion) into the project through domestic and foreign investors.
• Besides the tour-related issues, the two sides also agreed on a payment of $400,000 to the three victims of a traffic accident that happened late last year. It wish I could track that $400,000.  It will end up in interesting places for sure.  The accident happened on Dec. 27 in the tourist area, and North Korea called at first for at least $1 million in compensation. In an earlier traffic accident that killed a North Korean soldier in June 2001, $6,000 in compensation was paid.

From the Korea Times:

Tuesday, February 7, 2006

By Hwang Si-young

KT Corp., the country’s No. 1 fixed-line telecom and broadband operator, will build a gigantic communications center at the Gaeseong Industrial Complex in North Korea by 2007, the company said yesterday.

“Many local companies are expected to set up plants in Gaeseong in a few years. To meet a growing demand for fixed-line telephone and internet services, we decided to build a large communications center, approximately 9,900 square meters in size,” said KT’s Gaeseong District Office director Joung Youn-kwang.

There are currently 11 companies based in Gaeseong Complex. They are permitted and approved by the Ministry of Unification and Korea Land Corporation to do their businesses in Gaeseong.

The size of the industrial complex currently stands at 92,400 square meters, but according to KT, it will be expanded more to around 3,300,000 square meters by 2007, housing 300 or more companies.

As of now, KT operates a small communications center using a two-story temporary building in Gaeseong.

The company is likely to build a center after the overall industrial complex expansion is completed, Joung said.

KT will soon begin negotiating with its North Korean counterpart to secure land and bring additional telecommunications equipment, the company said.

According to Time Magazine:

A confidential report compiled by investigators working for a coalition of major U.S., European and Japanese tobacco companies indicates that North Korea has developed a highly lucrative source of hard currency: counterfeit cigarettes. The report dated June 29, 2005, offers a unique glimpse of the scale and sophistication of North Korea’s illicit-cigarette industry, which has allegedly counterfeited a vast array of brands—from Marlboro to Davidoff. The report estimates that production from 10 to 12 North Korean factories in the counterfeiting business may total 41 billion cigarettes a year, generating annual revenues of $520 million to $720 million. It’s not clear how much of this money flows to the regime of dictator Kim Jong Il, whether in duties or payments “for protection,” but the report speculates that its share of the profits may amount to $80 million to $160 million a year. That would be quite a windfall at a time when the North’s economy is reeling and the U.S. is trying to pressure Kim to abandon his nuclear-weapons program by cracking down on his regime’s income from business exploits as diverse as trafficking drugs and counterfeiting $100 bills.

Pyongyang has consistently dismissed U.S. allegations that it’s engaged in such illegal activities. But according to the report, some of these cigarette factories are directly owned by North Korea’s military and the internal-security service, giving the state “total control” over these operations. In other cases, says the report, the North’s contribution is primarily to provide a “safe haven” to factories run by overseas counterfeiting syndicates. Three of the factories that are said to be located in the Rajin area on the northeast coast of North Korea are allegedly run or financed by crime syndicates from Taiwan. One of these factories, equipped with second-hand equipment from China, has allegedly counterfeited such brands as Mild Seven, Dunhill and Benson & Hedges. According to the report, another factory in Rajin employed 120 people and was run by Chinese supervisors and technicians; North Korean officials were allegedly paid a “tax” on the factory’s cigarettes, which were then exported in fishing vessels owned by a Taiwan crime syndicate. Indeed, the report claims that a chief attraction of running such a business in North Korea is that the “regime’s willingness to allow dedicated, deep-sea smuggling vessels to use its ports provides the gangs with a secure delivery channel.”

Korea Times
Kim Rahn
12/30/2005

It has been eight years since South Koreans started visiting Mt. Kumgang, a scenic attraction in North Korea on a cruise program organized by Hyundai Asan.

Hopes and doubts about the success of the trips continue, as the tour program is strongly influenced by international and local developments. And many ups and downs have occurred over the past eight years.

The number of visitors plummeted during difficult times such as when a South Korean woman visitor was detained in 1999, when former Hyundai chairman Chung Mong-hun committed suicide in 2003, and when the North cut the quota of daily visitors by 50 percent last year.

Numbers rose when the government subsidized costs for students, the disabled and dispersed families in 2002, and when an overland bus route was developed in 2003.

Despite obstacles, the number of South Korean visitors to the scenic mountain resort passed the million mark last June.

Moreover, the communist country plans to open more tourist attractions to South Korea. Kaesong, the capital of the ancient Koryo Kingdom, Mt. Paektu on the border of North Korea and China, and maybe even the North Korean capital Pyongyang are on a possible list of tourist attractions for South Korean travelers.

Kaesong

At the end of last August, 500 South Korean tourists visited Kaesong, the old capital of the Koryo Kingdom (918 A.D.-B.C.1392), for the first time since the end of Korean War in 1953 on a one-day pilot trip.

It took only about two hours from central Seoul to the North Korean city, just above the Demilitarized Zone (DMZ) separating the two Koreas, by bus on an overland route including entry procedures. Its easy access is expected to be one of the attractive features for South Korean travelers.

“Kaesong has lots of attractions from the rich cultural heritage of 500-years of Koryo history,’’ Shin Hee-soo, executive director of the Korea Tourism Organization (KTO)’s inter-Korea tourism department, told The Korea Times.

The historic sites include Sonjuk Bridge, where high-ranking Koryo government official Chong Mong-ju was killed by Lee Song-gye, founder of the Choson Kingdom and the Confucian school of Songgyungwan. Parts of the school are now used as a Koryo museum.

Also located here are Kaesong Nasong, a fortress, and the royal mausoleum of King Wanggon, founder of Koryo. Natural resources such as Mt. Songak and Pakyon Falls are also popular.

“Travelers are also able to see North Koreans’ lives, as the tour buses pass Kaesong’s downtown. It will be another attraction, especially to the old people whose hometown was Kaesong,’’ Shin said.

Mt. Paektu

Last July, the KTO, Hyundai, and the North’s Asia-Pacific Peace Committee agreed to allow South Koreans to visit Mt. Paektu on the border of North Korea and China.

The KTO provided about 8,000 tons of asphalt pitch to the North to establish the tourism-based infrastructure on the mountain, including paving the runway of Samjiyon airport near the mountain.

The tour operators planned to conduct a pilot tour last year, but it was delayed until next April or May due to the dispute between the North and Hyundai over the dismissal of former Hyundai vice chairman Kim Yoon-kyu.

Last month, 15 delegates from the South inspected the repair work at Samjiyon airport.

The mountain is breathtakingly beautiful, comparable to the beauty of Mt. Kumgang. Some 20 peaks higher than 2,500 meters surround “Chonji,’’ the mountain-top crater lake.

Sunrise seen from the top, especially in August and September, is one of the must-sees of the trip to Mt. Paektu. Some 200 square meters of hot springs never freeze, even during winter.

“Mt. Paektu is more than a tourist attraction. It has a special meaning of the `spirit of Koreans.’ Many people have visited the mountain from the Chinese side, but the scene from the North’s side gives a different impression,’’ Shin said.

Pyongyang

The North Korean capital may not be opened as a separate tourist attraction but is likely to be visited if the tour program for Mt. Paektu includes Pyongyang as a stopover, a Hyundai Asan worker said.

In October last year, about 140 South Koreans visited Pyongyang on a pilot trip. The city has many historic sites from the ancient Koguryo Kingdom and Tangun, the legendary founding father of Korea.

Their visit was, however, mainly focused on Mt. Myohyang near the capital, which is famous for autumn foliage.

Shin pointed out that the reclusive regime is not likely to open its capital wide to South Koreans, adding that visits may be made in the case of big events, such as the “Arirang’’ mass games which were held last year to celebrate the 60th anniversary of the founding of the Workers’ Party.

Obstacles to Trip to North Korea

The trip to the North has obstacles to overcome. The tours mainly target people whose homes were in North Korea or whose family members are still there.

But the numbers of such people are limited. The tours need other kinds of visitors to be successful. Besides the attraction of entering a `forbidden’ land, North Korea lacks features of interest to visitors.

A survey showed that 95 percent of the travelers to Mt. Kumgang were traveling there for the first time, indicating the small number of returning visitors. “Establishing golf courses and opening a beach at Mt. Kumgang are part of the efforts to increase repeat tourists,’’ Shin said.

Restrictions by North Korea also dampen the enjoyment of South Korean visitors, Shin pointed out. Visitors’ activities are strictly regulated, and the trips are limited to special times and places.

The trips to the North require harmony between the two governments, the people’s support, and a sense of duty as a “plus alpha’’ factor, he stressed.