North Korean Economy Watch

Korea Times
Kim Yon-se
10/3/2006

A tour to Mt. Paektu via North Korean territory for South Koreans has become virtually impossible this year even though Hyundai Asan, the inter-Korean tourism operator, has pushed the project for more than a year.

Should Hyundai Asan reach a final agreement with the North to open tours soon, bad weather conditions on the mountain will make it impossible for tourists to travel to Mt. Paektu, located on the border of the North and China.

“Because of early snowfall and chilly weather there, ordinary tourists are not allowed to climb Mt. Paektu after September,’’ a spokeswoman of the Hyundai Group said yesterday.

Ordinary tours will be possible only between June and September, she said. “So the launch of tours will not be feasible until next May at least.’’

Since Hyundai Group Chairwoman Hyun Jeong-eun agreed with North Korean leader Kim Jong-il to develop the mountain as a tourist venue in July 2005, Hyundai Asan had to delay running pilot tours twice.

Apart from political setbacks, involving the United States’ unfavorable views toward inter-Korean businesses, the spokeswoman attributed the continuous delay to unfinished construction of a link between the mountain entrance and Mt. Paektu Airport.

Besides technical problems, Hyundai Asan, the tourism unit of Hyundai Group, have been troubled by the ongoing allegations that the North is still seeking a new South Korean partner for tours to Kaesong City and Mt. Paektu.

Furthermore, some media reports said last month that North Korea allegedly asked Lotte Tours to take on the business of Kaesong Industrial Complex operated by Hyundai Asan.

But the spokeswoman, a close aide to Hyun, said the possibility of Lotte’s obtaining of inter-Korean business rights is low. “We hold the exclusive rights legally. And we haven’t received any proposals from Lotte,’’ she said.

After Lotte Tours made it clear that it had stopped talks with North Korea on replacing Hyundai Asan to pursue inter-Korean tourism projects, last year, the company is declining to comment on the issue this year.

Chairwoman Hyun has not taken a trip to the mountain via North Korean entrance _ only a few Hyundai Asan officials have surveyed the tour route.

A Hyundai Asan official predicted beyond planned ordinary tours, South Koreans will also enjoy skiing there between April and May in a few years. 

Yonhap:
9/23/2006

Fees paid by South Koreans for a visit to a scenic North Korean mountain resort has risen sharply in the past two years, a government report showed Saturday.

The Unification Ministry report to the National Assembly revealed that the admission fees for Mount Geumgang have risen twice since mid-2005, with the fee for a one-day trip jumping around 200 percent.

In 2004, North Korea demanded different admission fees from South Korean tourists depending on the length of their stay in the resort, the report said. Pyongyang has since raised the fees once in May 2005 and again in July of this year, it said.

For example, a tourist taking a one-day tour now should pay US$30, three times more than in 2004, the report said. The revised fees range from US$48 for one night and two days to US$80 for two nights and three days, it said. 

The tour to the North Korean resort has been organized by South Korea’s Hyundai-Asan Corp. since 1998. More than 1 million South Koreans have so far visited the resort.

From South African Sunday Times:
NKorea detains 1,000 tourists
9/18/2006

Up to 1,000 South Korean tourists were detained briefly in North Korea after a lawmaker amongst them offered snacks and ice cream to a soldier, a report said.

The group was visiting Mount Kumgang, a craggy tourist enclave in the eastern part of the Stalinist state, when the incident happened, according to tour operator Hyundai Asan, who was quoted by Yonhap news agency.

The tourists were detained for some 40 minutes after the contact between a North Korean military guard and Cha Myung-jin, a lawmaker of South Korea’s opposition Grand National Party, the report said.

The South Koreans were later released and deported home, reportedly after the South Korean side apologised and promised such unauthorised interaction would not happen again.

Amid easing tensions between the two Koreas, more than a million tourists have visited the rugged terrain just a few kilometres north of the border with South Korea since tours began in November 1998.

Visitors to Mount Kumgang enjoy circuses, listen to old Korean ballads, and soak their limbs in natural hot springs, but they are prohibited from stepping outside the zone to talk with North Korean people.

From Joong Ang Daily:
9/18/2006
Seo Ji-eun

Hyundai Asan Corp., a Hyundai Group affiliate with the exclusive right to the North Korean tourism business, plans to take advantage of air routes to ratchet up its tourism operation at Mount Kumgang.

The company signed a memorandum of understanding with Jeju Air Co. yesterday to develop tour packages to Mount Kumgang using an air route between two South Korean cities ― Gimpo in Gyeonggi province and Yangyang in Gangwon province, near the border with North Korea. Buses will ferry travelers to Mount Kumgang from Yangyan.

Flying between the two cities will shorten the travel period by almost three hours, from the six hours needed to reach Mount Kumgang by road.

The flights will run twice daily and may increase to three times a day within this year, said Yoon Man-joon, chief executive officer of Hyundai Asan, in a meeting with reporters.

The chief executive forecast that easier access to the North Korean tourist attraction will boost the number of tourists.

“Mount Kumgang travelers using the Yangyang Airport will be given discounts on air fees and travel package expenses,” he added.

He also revealed that Hyundai Asan and North Korea are in discussions to allow tourists to fly directly from Gimpo to Wonsan, a North Korean port city on the East Coast, about 110 kilometers from Mount Kumgang. That route would reduce the travel time to North Korea even further.

“We’ve had a large number of potential customers who gave up on the Kumgang tour because of the long land trip,” Mr. Yoon said.

He stressed that having tourists be able to take airplanes to North Korea has been a long-held dream of the company. He added that the realization of that dream would help the Mount Kumgang tourism business firmly establish itself as a cash cow for Hyundai Asan.

From the Donga:
9/5/2006

“Problems can arise anytime you do business in North Korea since there is no market order. However, when business partners disregard agreed-upon deals, it is impossible to conduct any new business. Someone who betrays others can always betray me. Now, who will be willing to trust North Korea and make new deals with it?”

Upon hearing the news report yesterday that North Korea sold the rights to build a large-scale resort including a golf course within the Gaesong Industrial Complex to South Korean real estate developer Unico, despite the fact that Hyundai Group currently holds the rights, one executive of a large company was assured that North Korea was not a trustworthy investment partner.

“If the South Korean government fails to have a control over ‘lawless’ North Korea, the entire business with North Korea can fall into a crisis,” he worried.

During the Kim Dae-jung administration, Hyundai Group began its North Korean business led by then-chairman Chung Ju-yung. It has invested more than $1 billion in North Korea, including $450 million (about 510 billion won by then exchange rate) illegally transferred to the North as a price for holding the inter-Korean summit in 2000. In the process, the company had to go through a major management crisis and the tragedy of Chairman Chung Mong-hun’s suicide.

At such a great cost, Hyundai earned from the North “seven business rights,” which include the rights to provide electricity, railway, tourism, and a dam. With regards to the 3-phase Gaesong Industrial Complex project, it obtained a certificate with which it is allowed to use the land for 50 years.

Nevertheless, Hyundai is gradually being excluded in North Korean businesses except for the existing Geumgang Mountain tour and the first-phase Gaesong Industrial Complex development. There are even rumors that North Korea is in the final stages of negotiation with Lotte Tours over tourism business in Gaesong and Baekdu Mountain, excluding Hyundai that has the business rights in those areas.

Now that North Korea is found to have sold the rights to use 1.4 million-pyeong of land in Gaesong to Unico at the price of $40 million, there is a greater sense of crisis in Hyundai.

It is needless to say that North Korea bears the largest responsibility for the recent trouble.

However, some point out that the South Korean government has been too lukewarm in its response to the problems with the North, out of fear that inter-Korean relations might suffer. They argue that such an attitude only encourages North Korea’s “derailment.”

“Hyundai Asan’s deal with the North over the second and third phases of the Gaesong Industrial Complex development and Unico’s deal with the North can cause overlaps or conflicts. Thus, the companies will have to negotiate over the matter,” said Goh Gyeong-bin, director-general of the Social and Cultural Exchanges Bureau at the Unification Ministry, yesterday when the news on Unico’s North Korea deal was reported.

“The Ministry of Unification never approved Hyundai Asan of its North Korea business to build a golf course in Gaesong. I believe a double deal is possible here just like it is in the private area,” he added.

This implies that the extraordinary business of inter-Korean economic cooperation is being recognized as an ordinary area of private autonomy where private business partners must resolve problems through self-negotiations.

However, everyone knows that Hyundai’s North Korea business did not start out as a mere private business activity. “The government has drawn no clear line in North Korean business, allowing companies to recklessly engage in such business only to encourage North Korea to develop bad habits,” one executive of an economic organization pointed out.

“In order to effectively manage business deals with unpredictable North Korea, the South Korean government must provide clear trade rules and guidelines. Considering the extraordinary nature of North Korean business, relying on the private sector’s autonomy will only extend uncertainties,” professor Hong Ki-taek of ChungAng University emphasized.

From the Donga:

The Chinese Government is hurriedly working on making the world recognize Mt. Baekdu (or Mt. Changbai in Chinese) as Chinese territory.

The Wenhui Newspaper of Hong Kong reported on July 30 that China has decided to register Mt. Baekdu on the World Geopark list designated by the United Nations Educational Scientific and Cultural Organization (UNESCO).

The Jilin Provincial Government of China has so far made efforts to get Mt. Baekdu registered as a world natural heritage site by the year 2008 when Jilin hosts the general assembly of the UNESCO World Heritage Committee. It might be fair to call this the “Mt. Baekdu Project” of incorporating the old territory of Goguryeo, an ancient Korean kingdom, into Chinese history, as it follows the Northeast Asia Project that focused on incorporating its history into China’s.

Back in 1980, China got Mt. Baekdu designated as a UNESCO Man and Biosphere (MAB) zone; the State Council designated Mt. Baekdu as a national-level natural protection zone in 1986 and has since managed it.

Mt. Baekdu has long been managed by the Yanbian Korean Autonomous Prefecture, where people of Korean origin collectively reside. Last year, the Jilin Provincial Government established the “Committee for Protection, Development and Management of Mt. Changbai,” an organization directly belonging to the provincial government and responsible for management of the mountain.

In a meeting with the “First Delegation of Chinese Internet Journalists Visiting Jilin” on July 22, Vice Director Li Zhanwun of the Committee said, “Mt. Changbai ranked second out of 17 places on the preliminary list of the nation’s cultural and natural heritage that the National Construction Ministry announced for the first time in January. Protection and development of the areas near Mt. Changbai has entered a new phase of development.”

The Committee plans to inject two billion Yuan (approximately 240 billion won) to develop the western slope of Mt. Baekdu on the Chinese side and open it around the year starting 2007.

Mt. Changbai Airport, which is currently being constructed in Fusong County 36 kilometers away from the North Korean border, is scheduled to open before the 2008 Beijing Olympics begins. The Jilin Provincial Government is also sparing no investment to expand the transportation networks near Mt. Baekdu, and is planning to complete construction of the Mt. Changbai Eastern Railroad, three highway networks and circular roadways in the next three years.

The Chinese National Tourism Agency and the Jilin Provincial Government recently held the first tourism festival near Mt. Baekdu; they are also active in attracting tourists from Russia and other foreign countries by holding the Yanbian Korean ethnic exposition. They also seek to stimulate the economy by developing mineral water in the areas nearby Mt. Baekdu and expanding cultivation of ginseng there.

Meanwhile, the Chinese government is reportedly seeking to register as UNESCO world cultural heritage the remnants of the Sanggyeong Yongcheonbu, which is the old capital of another ancient Korean kingdom—Balhae—located in the Bohai Bay, Ningan City, Heilongjiang Province.

from Yonhap:

U.S. travel agency cancels tour program to N. Korea

Washington, July 30 (Yonhap) — Travel agencies have scrapped their Pyongyang tour packages after North Korea cancelled its annual propaganda festival, citing flood damage and a joint South Korea-U.S. military training exercise, agency officials said Sunday.

North Korea had allowed travel companies to recruit U.S. and other foreign citizens to attend its Arirang Festival, which was to open on Aug. 15 for a two-month run.

The event, which features mass gymnastic shows, began in 2002 to commemorate the North’s founding leader Kim Il-sung, father of current leader Kim Jong-il.

North Korea said last week it would cancel this year’s Arirang Festival due to recent floods that killed at least 154 people, left 127 others missing and caused serious damage to its infrastructure. The North also cited the Ulji-Focus Lens, an annual South Korea-U.S. drill due to be launched in August, arguing the exercise is a rehearsal for a northward invasion.

On Sunday, Asia Pacific Travel, a U.S. travel company and Koreakonsult, a Swedish travel agency, withheld their Pyongyang trip plans, as the North’s festival was cancelled.

Asia Pacific Travel was to book about 200 Americans for a trip to North Korea, which was also to include visits to scenic Mount Myohyang, the inter-Korean industrial complex in Kaesong and the demilitarized zone.

North Korea has largely been off limits to Americans, since the 1950-53 Korean War ended with an armistice, not a peace treaty. The U.S. fought alongside South Korea to repel invading communist North Korean troops, aided by Chinese soldiers, during the conflict.

The relations between North Korea and the U.S. have worsened since the North conducted multiple missile tests on July 5, despite repeated international warnings. The U.S. and Japan led a U.N. Security Council’s passage of a resolution imposing sanctions on the North.

North Korea and the U.S. don’t have diplomatic relations.

from the BBC:

N Korea cancels gymnastics gala

North Korea has cancelled a massive festival featuring thousands of gymnasts, soldiers and performers because of flooding earlier this month.

The two-month long Arirang festival has in the past been popular with western tourists and visitors from South Korea.

The event features spectacular synchronised acrobatic displays and is seen by Pyongyang as a way of boosting leader Kim Jong-il’s popularity.

Floods in North Korea this month killed more than 100 people.

According to the UN’s food agency, some 60,000 people were left homeless by the floods, which followed torrential rains.

Strained relations

Han Song Ryol, a North Korean envoy to the United Nations, told the Associated Press news agency the festival had been “cancelled due to flood damages”.

He did not say whether the event would be rescheduled.

Pyongyang had planned to invite up to 600 tourists every day from South Korea to see the festival, South Korean news agency Yonhap reports.

The agency said South Korean officials were concerned that the cancellation of the festival could lead to contacts between the two Koreas being curtailed.

Relations between the two countries are already strained over Pyongyang’s recent decision to test new, long-range missiles, ending a self-imposed moratorium on such tests.

Froom Joong Ang Daily:

Citing flooding, North pushes back a festival
July 31, 2006

The North Korean Arirang festival, which was to have begun on Aug. 15, was postponed until next spring, according to the president of the Korean American National Coordinating Council. Rain damage in North Korea was cited as the reason for the delay.

Yoon Kil-sang, the president of the council, posted the postponement announcement Friday (in the United States) on Minjok, an Internet news site there. He said he was notified by the North Korean mission to the United Nations of the postponement.

But South Korean groups said they knew nothing of the change of plans. An official at the South Korean committee preparing for a joint celebration of Liberation Day, Aug. 15, said the committee had not been told.

“In order to prepare for the Arirang festival, working-level meetings should have been nearly finished, but we have not heard from the North,” the official said.

Despite the recent North Korean missile test salvo, Seoul said last week that it would allow a private South Korean delegation to participate in the holiday commemoration and the festival.

Chosun Shinbo, published by a pro-Pyongyang group in Japan, reported on Friday that an area where the festival was to be held was hit hard by recent flooding. It said 1,200 trees were down and roads had been destroyed.

The Arirang Festival, which was first held in 2002, is a patriotic festival praising the country’s leaders and system using phalanxes of people with flash cards, dances and circus shows. Last year, in its second staging, 7,000 South Koreans attended. The festival was originally scheduled to run from mid-August to mid-October.

Separately, in a relatively rare admission of problems in paradise, the Chosun Shinbo also reported in detail on the flood damage in the North. Reportedly, the Pyongan provinces near Pyongyang were hit hard, with 10,000 people affected by floods and 30 bridges destroyed. North Hwanghae province, the agricultural center for much of the country, also suffered substantial damage, the newspaper reported.

Last week, the United Nations World Food Program estimated that 60,000 North Koreans had been left homeless and 30,000 hectares of farmland were destroyed in the recent flooding.

Kwon Tae-jin, a researcher for the Korea Rural Economic Institute, said yesterday that it took several years for the North to repair damage from a flood in the mid 1990s and that the recent flood was likely to cut into food production substantially. But he said if paddy walls could be rebuilt quickly and quarantine measures taken to prevent the spread of disease, damage could be minimized.

From the Joong Ang Daily:

Seoul gives its blessing to view North’s festival

July 21, 2006-The Roh administration said yesterday it would allow a private delegation to participate in North Korea’s celebration of Liberation Day, the August 15 anniversary of Japan’s surrender in 1945. It will also allow South Koreans to attend the annual Arirang Festival that begins the same day and runs for two months.

The festival is widely seen by critics as an extended paean of praise to Kim Il Sung, North Korea’s founder and leader until his death in 1994.

Lee Jong-seok, the unification minister, told a news conference yesterday that non-governmental exchanges such as those for the holiday and the festival would go ahead “according to procedures.” He said no decision had yet been made on whether Seoul would send an official delegation to participate in the North’s Liberation Day rites.

After the press conference, a Unification Ministry official said permission to travel to North Korea would be given to all comers except for those barred by law from traveling there. The latter group once included those convicted of National Security Law violations or those under investigation for alleged violations of that anti-communist statute; now, only those involved in a current criminal investigation of any kind are barred.

Tensions in the region escalated rapidly after North Korea test-fired seven missiles on July 5. Ministerial talks a week later collapsed after Seoul refused to continue providing material aid, and the latest sign of tension came yesterday when Pyong-yang, following through on an earlier threat, told Hyundai Asan to repatriate 150 workers from the construction site at Mount Kumgang for a separated family reunion center.

The work, funded by Seoul, was scheduled to be completed in June 2007 at a cost of 50 billion won ($53 million). North Korea’s Red Cross told its counterpart in the South earlier this week that if rice and fertilizer stopped flowing north, the family reunions could not be held.

The decision to allow civilians to travel for the festivities is in line with Seoul’s expressed intention to keep channels with the North open, but critics said darkly that North Korea was certain to abuse that good will.

At the failed inter-Korean talks last week, Pyongyang demanded that Seoul end its restrictions on where South Koreans in the North can travel. It wanted those visitors to be able to visit what it called “holy places and landmarks,” a reference not to religion but to the cult surrounding Kim Il Sung and his son Kim Jong-il, his father’s successor as the country’s leader. Those “holy places” include Kumususan Memorial Palace, where Kim Il Sung’s mausoleum is located.

Critics also saw a train wreck, in their view, in North Korea’s contention at the recent Busan ministerial meeting that South Koreans are being protected by North Korea’s “military-first” policy. The Arirang Festival performances in recent years have been heavy in praising that policy, and some of those allegedly “protected,” they say, will be in attendance.

by Lee Young-jong, Ser Myo-ja 

Assuming the US does not impose tourist restrictions!

In August-October 2005, the DPRK permitted American tourists to enter the country to see the spectacular Arirang performance.  I saw this performance, and Kim Jong Il, and it is not to be missed.  From the DPRK perspective, the experiment must have been a success so it is being repeated again this summer.  If you are interested in going, and I recomend you do, there are several operators that can take you:

Koryo Tours has been running tours for a long time.  Based out of Beijing, but run by two great English chaps, Simon and Nick, Koryo has great access to the country.  I have personally seen them in action and marveled at how efficiently they handled the multiple requests of their customers.  Nick and Simon have worked on two documentaries in the DPRK, the Game of Their Lives and A State of Mind.  They are currently finishing up their third, Crossing the Line.

Today I got an email from Walter L. Keats at Asia Pacific Travel.  He tells me, “We are the only U.S. company to be directly authorized by the Korea International Travel Company (KITC) to bring American and other tourists to the DPRK during the Arirang period. You can see a copy of our letter of authorization on our website as well as a background sheet on our involvement with North Korea since 1995.”  (I am really surprised an American company could pull this off).

I have visited the DPRK twice with the Korean Friendship Association.  KFA trips are something else altogether.  The KFA is sponsored by a different DPRK ministry than the other tour companies and the agenda, aside from not being released until you are in Pyongyang, contains come political-ish activities that might make all but the hardiest of travellers blush.  And don’t expect to run for Congress when you get back home.  Still I had a great time and learned a lot.  The price is generally much cheaper, but more often than not, you will be staying in the isolated Sosan hotel.

If you visit the DPRK with any of these groups this summer, please let me know how it went and what you learned.  Don’t forget to tell them I sent you!