North Korean Economy Watch

Daily NK
Kim Young Jin
11/14/2005

Employees from the Emperor Hotel in the city of Rajin in North Korea are said to make their livings by doing business in market places. The hotel is well known for its casino.

On the 13th day of this month I had an interview with a manager of the hotel, who I will call Kim Myung Chul (alias, 42 years of age) for the sake of his safety. “The hotel has had much difficulty paying wages to its employees since it closed its casino in February,” he said. “It laid off about half of its 300 employees, and even some of the remaining half had to open restaurants near the hotel or start business in market places for their livings.”

The Emperor Hotel is a five star hotel founded by the Emperor Group in Hong Kong that invested about 24 million dollars in it. It is well known for the finest casino in North Korea.

For the last two years, two high raking Chinese officials have lost a large sum of government money to the casino and the Chinese government complained to the North pressing it to close it. Thus, it was closed in February, and the hotel lost many Chinese tourists. The number of Chinese tourists had been almost 20 thousands a year before. Virtually the hotel is out of business now.

Chae Moon Ho, a former head of Traffic and Transportation Office of Yanbian Autonomous Prefecture in Jilin, China squandered 3,510,000 yuan (more than 434,000 dollars) of government money in the casino and was sentenced to 8 year imprisonment at the first trial. Mr. Wang, a former superintendent of highway construction, wasted 870,000 yuan (about 107,000 dollars) of government money in the casino and was taken into custody.

After these incidents, the Chinese government had prevented travel agencies around Yanbian area from holding North Korean tourism in March this year. It lifted the ban last September.

The following is some excerpts from the interview.

– When did you start to work for the Emperor Hotel?

I have been working in the hotel since 2000. People in Rajin call it Bipa Hotel or the Five Star Hotel. When the hotel was first opened, it was run in a capitalistic way. Even hostesses from Russia and China were recruited. But they have all returned now because they could no longer get paid. It took 3 years to complete its construction. I heard that it had been intended to be a 30 story building, but it is 7 stories high because the Emperor Group cut spending. Visitors were usually foreign gamblers and those Chinese who enjoyed fish and other seafoods.

– How is business now?

Business situation became very tough after the Chinese stopped coming. Usually thousands of Chinese people visited for the summer, and Russian and Chinese gamblers constantly came and went. But since the casino was closed and the Chinese stopped coming, it has been difficult for the employees to be paid. The hotel even laid off half of its employees. At frist 300 people were recruited, but there are less than 150 employees now. Among them, less than 50, mostly janitors, cooks, Karaoche coordinators, massagists, come to the hotel to work.

– Does the owner not pay the employees?

I do not know. Even though the owner is Emperor Group from Hongkong, the employees are controlled by the Administrative Committee of Rajin city. I suppose that wages must be distributed by the civil authorities. Anyhow, I have not been able to be paid since last spring.

– What kind of people are employed in the hotel?

High ranking people were eliminated from the recruit lest they be contaminated by capitalism brought in by foreign gamblers. For example, Kim Il Sung University graduates, partisans, workers involved with law and national defense and their family members were all eliminated. Mostly tall and good looking people from Rajin were accepted.

– How are the employees paid?

At first, we were well paid. We were not rationed but received wages. Until 2000, I received 300 yuan a month. At that time, 1 yuan($0.1237) was equivalent of 25 Chosun(NK) won($0.0125), and rice was quite cheap. Hence 300 yuan made a sound pay. Moreover, we were fed three times a day and allowed to sleep in the hotel, which was considerable benefits for us. But while business was getting difficult, employees were being turned into 8.3 workers one after another. Finally, payment started to be incomplete from last February. We could just take three meals a day thanks to the money the 8.3 workers gave to the hotel.

– What is 8.3 worker?

The hotel forced some of its employees to earn money all by themselves and to give some part of it to the hotel. 8.3 worker is called so because Kim Il Sung ordered the system during a factory visit on a third day of August.

– How do 8.3 workers earm money?

Some workers opened restaurants near the hotel, and others merchandize in market places. There are people like me who are out here in China and do business with old customers. Chinese tourists like to eat fish and other seafoods in Rajin. That’s why 8.3 workers like to open seafood restaurants near the hotel calling them branch restaurants of the hotel. There are more than 10 such restaurants near the hotel. There are also a few souvenir shops. If they earn money, they give some of it to the hotel. Those who merchandize are just like that. If you give some money to the hotel every month, you are not required to go there to work.

– Does the money go to Emperor Group?

No. It goes to the Administrative Committee of Rajin city. The hotel is just a Work Place: we are not under the owner’s control. We are required to take permission from the Administrative Committee to work outside the hotel.

– Do 8.3 workers make much money?

It is advantageous for business to be an employee for the hotel. We do not pay such heavy taxes as ordinary merchandizers do. It is also easier for us to occupy stalls in market places than for ordinary merchandisers.

– What is people’s life like in Rajin recently?

Outsiders envy Rajin and Seonbong because they compose the free trade zone, but the situation is on the contrary. The government takes more from Rajin and Seonbong because of the free trade. Rice is also more expensive. They are good places for the rich to live in but not for the poor.

Christian Science Monitor
Donald Kirk
10/4/2005

Its South Korean funders say it offers potential for cultural exchange. But the monk who oversees it readily admits no North Koreans may visit.

As they lead visitors along a trail below craggy rocks inscribed with praise for the late “Great Leader” Kim Il Sung, young North Korean guides offer a carefully crafted narrative.

They criticize President Bush. They take on US policy. And last weekend, they appeared eager to denounce the dismissal of Kim Yoon Kyu, who is currently under investigation for fraud. The South Korean executive worked for more than 10 years to develop this unusual tourist zone on the east coast several miles above the demilitarized zone that separates North and South Korea.

“We are willing to reduce the number of tourists coming here as an expression of our confidence in him,” says Koo Eun Hyun, a smiling 20-year-old, repeating the North’s demand for reinstatement of Mr. Kim as president of Hyundai Asan, part of the Hyundai group, which is investing $1 billion in building the complex.

Mr. Kim led the project, now subsidized by the South Korean government, from the time the first shiploads of visitors sailed from South Korea seven years ago. Tourists now travel by newly paved road, and Hyundai Asan in June announced the millionth visitor – far short of the 5 million it had hoped for.

Indeed, the project loses vast amounts of money, and is likely to lose still more. The standoff over Kim’s dismissal is escalating amid a South Korean investigation into alleged fraud in economic projects in the North – including whether some funds wound up in the hands of North Korean officials – prompting the North to cut the quota of tourists from 1,200 to 600 a day.

Perhaps as a result, Kim Young Hyun, a Hyundai Asan vice president, prefers to talk about a $10 million project, largely funded by South Korea and Hyundai Asan, to rebuild a Buddhist temple complex inside the zone that was largely destroyed in the Korean War. “Buddhism is traditionally the religion for Koreans,” he says. “Cultural exchange can be the foundation of economic exchange.”

The Venerable Jejeong, the scholarly South Korean monk who oversees the complex readily admits that North Koreans are banned from the complex, just as they are from the rest of the zone, except when they come to work. Those few North Koreans on the site, he says, “ask questions about history but do not ask other questions.”

In fact, he says, he’s never talked to North Koreans outside the zone and has no idea how freely – or if – they can practice their religion. Still, he shares the optimism of South Korean authorities about the future.

“We can minimize the differences and find common ground,” says Mr. Jejeong, who has practiced Buddhism in Thailand and San Francisco. “Currently our educational systems are completely different. North Koreans are not interested in religion.”

Jejeong places his hopes for opening the temple to worship “after unification.” He cites an easing of religious restraints in China. “The North Koreans may be influenced by China indirectly,” he muses.

In the meantime, the temple serves as a monument to North Korean propaganda. A plaque in front of the skeletal outlines of new buildings says that Kim Il Sung and his wife, the mother of current leader Kim Jong Il, visited on Sept. 28, 1947. The plaque blames the leveling of the complex on US bombing.

But for now, North Koreans would rather prove their authority over Hyundai Asan than hark back to the war. Tourists who visit traipse along a few familiar trails, attend an acrobatic performance, dip into baths fed by hot springs and dine in modern restaurants, all closed to North Koreans seen toiling with ancient implements in the fields beyond the wire.

They listen as guides extol the beauties of the region, all under the watchful gaze of North Koreans as anxious to parrot policy as to impose fines for littering.

“We regard [Hyundai Asan’s] Kim Yoon Kyu as a pioneer,” says Miss Koo. “We sacrifice profits for the sake of friendship.”

Korea Times
Andrei Lankov
9/13/2005

One can imagine how the friends and relatives of Min Yong-mi, a 35 year old housewife, were shocked to learn in June 1998 that the woman was detained as a South Korean special agent who had undergone special training and snuck herself into the North to destabilize the North Korean government.

What did earn the woman, an otherwise quite typical South Korean ajuma, a mother of two children, such a James Bond style reputation? Obviously, few comments she made on June 20, 1999, when talking to a guide while on tour in the Kumgang Mountains.

Actually, the description of what happened at 1:40 pm differ. All reports agree that the entire affair began when Mrs. Min asked a North Korean tour guide or “environmental inspector” how to read a rare Chinese character in one of the names of the Buddha that was carved on a rock. The “inspector” (in all probability, a plain clothes policemen) did not know the character as well. The conversation followed.

According to one version, Mrs. Min merely said that after unification the guide would be able to meet her in Seoul. However, it is more likely that the talk was far less innocent. Obviously, somehow Mrs. Min and her guide began to talk about defectors to the South (still a relatively small group in those days). Mrs. Min assured her North Korean interlocutor that the defectors were doing all right. The guide expressed his disbelief and said that all defectors are sentenced to hard labor. Mrs. Min assured him that this was not the case and said something like “If you come to the South, you will see for itself.” According to another version, she said something more moderate, to the effect that defectors were getting by quite well in the South.

Whatever the case, she was ordered to surrender her provisional ID and pay a fine of $100. Realizing that she was in trouble, Mrs. Min complied immediately, but it was too late. She was detained, accused of subversive propaganda, and spent about a week in detention, being interrogated by officers who arrived from Pyongyang.

The detention of Mrs. Min was the first crisis in the history of the Kumgang Project, then as now the largest joint operation of the two Koreas, a showcase of economic cooperation between the two governments.

The project was conceived in 1989, when Chung Ju-yung, the founder of the Hyundai Group, visited North Korea for the first time. One of the schemes briefly discussed in 1989 was an idea of a large tourist park in the North, to be patronised by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) Mountains which for centuries have been regarded in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the DMZ, the border between two Korean states.

It took, however, a decade and some major political changes to start the project moving. It was only in November 1998 that the Kumgang Mountain Tourist Project began to operate.

The idea was simple. The North Koreans created a type of ghetto for the South Korean visitors. A part of the Kumgang Mountains was fenced off, and the local population was moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbour, while the visitors went on mountain walks and sight-seeing trips.

This clever scheme solved the greatest problem Pyongyang saw in its interactions with the South – the problem of information flow. The North Korean commoners are supposed to believe that their South Korean brethren are suffering under the cruel yoke of the US imperialists. Understandably, their government does not want them to know that the per capita GNP in the South is 20 to 30 times higher than in the North. In the Kumgang Mountain Project the rich Southerners were kept out of sight of the average North Koreans, being accompanied only by a handful of carefully selected minders.

However, there always was a threat that South Koreans would do something improper. They were instructed before their trip not to talk politics at all. But how could those spoilt people from a decadent bourgeoisie society be trusted to behave themselves? A subject lesson in obedience was needed.

Some circumstances make us suspect that the entire affair was prepared in advance, and that the guide was deliberately provoking Mrs. Min. However, this is likely to remain uncertain until the collapse of the North Korean regime and the de-classification of their documents. It is still probable that Mrs. Min was simply unlucky. But it is clear that the North Korean side expected something like it to happen.

Mrs. Min’s ordeal lasted for a week. Pyongyang radio claimed her as a South Korean spy, the tours were suspended for a time, and frantic diplomatic activity ensued. Mrs. Min was released after six days of detention, to spend some time in hospital. But the North Korean authorities had attained their goal: they demonstrated that tourists are better to mind their tongues while enjoying the scenic beauties of the Kumgang area.

There were more detentions of South Korean tourists, none of which received comparable publicity. But the lesson had been given, and South Koreans learned to behave themselves.

The Mrs. Min incident contributed to the ongoing crisis of the Kumgang project. This crisis came to a climax in spring 2001 when the tours were almost discontinued. The Kumgang project was salvaged by a large-scale government intervention, but that is another story…

Korea Times
7/18/2005

Following Pyongyang’s scheduled return to the nuclear talks, the agreement to expand tourism is welcome news from the North. If the latest changes in the North Korean positions are genuine, they could turn tension into peace on the Korean Peninsula. Much of the credit should go to the Hyundai Group’s untiring efforts and the isolationist country’s bold turnaround toward an open-door policy. At stake is how to keep this momentum for peace and prosperity rolling despite challenges from within and without.

The agreement between North Korean leader Kim Jong-il and visiting Hyundai officials signals the start of full-blown tourism in the North. Next month, South Koreans will be able to climb Mt. Paektu, the nation’s spiritual headspring, from the North Korean side. They will also be able to explore in an hour’s drive from Seoul the rich cultural heritage of Kaesong, old capital of Koryo Dynasty (A.D. 918-1392) from which the country’s name originates. Mt. Kumgang will also open its inner sceneries to southerners.

This “triangular tourism project” will sharply improve the North’s tattered economy. North Korea’s real GDP increased 2.2 percent last year, but that in the accommodation-catering sector jumped 16.3 percent, thanks largely to the Mt. Kumgang tourism business. As South Koreans fly directly to Mt. Paektu or reach the mountain via Pyongyang, the tourists’ dollars will not go to China but to North Korea. The two Koreas also can build a world-class resort belt along the eastern coast starting from Mt. Sorak.

Hyundai will have to make massive investments to expand airports and develop other infrastructure. Although the group has won the exclusive development rights, it is not certain whether it alone can meet all the costs and ensure the project’s commercial viability. North Korea in this regard should refrain from asking excessive charges, as was the case in the Mt. Kumgang project. Nor should there be any recurrence of controversies stemming from under-the-table payments and other murky deals.

Both sides need to take a long-term approach. Just as Mt. Kumgang tourism helped to prevent an escalation of hostilities during naval battles in the West Sea, so can expanded tourism contribute to the establishment of a lasting peace on this peninsula. Therefore, its success depends on finding the equilibrium between peace and commercial dividends. A prerequisite for this balance is genuine trust between the two Koreas, a trust that cannot be shaken by internal splits or changes in external circumstances.

For North Korea, all these inter-Korean projects will help to ensure its security and economic development. As everyone knows, however, what Pyongyang really needs are more brisk economic transactions with the international community after being cleared of nuclear suspicion. And this is why it should show sincerity at the regional disarmament talks next week.

Asia Times
Andrei Lankov
6/28/2005

This month, Hyundai Asan Corp stated that the number of tourists to have visited the Kumgang Mountain Tourist Project in North Korea since it began operations in 1998 had finally reached one million. This is seen as a reason for some major celebration – as any sufficiently round figure would.

However, in January 1999 Hyundai Asan leaders assured that by the end of 2004, there would have been an accumulative 4.9 million visits to the North. The actual figure was about 900,000. At the same time, Hyundai Asan managers predicted that in 2004 alone some 1.2 million tourists would visit the project. Yet the actual number of visits that year was 274,000.

Does this mean the Kumgang project is a failure? Not quite, since it remains in operation – unlike many other much-trumpeted intra-Korean projects. But it is kept afloat only due to persistent political and financial support from the South Korean government (or, in other words, due to the deepness of the pockets of South Korean taxpayers). Within its short history, the project has been on the verge of bankruptcy, and has even seen its chief executive officer driven to suicide.

The project was conceived in 1989, when Chung Ju-yung, the founder of Hyundai Group, spent a week in North Korea negotiating with the Pyongyang leaders, including president Kim Il-sung himself. The chairman of Korea’s largest industrial conglomerate was born in what is now North Korea, and in last years of his long and eventful life he demonstrated a sentimental attachment to his native land, being the most enthusiastic proponent of South Korean investment in the North.

One of the schemes briefly discussed during his 1989 visit was the idea of setting up a large tourist park in North Korea, to be used by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) mountains, which for centuries have been seen in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the Demilitarized Zone, or DMZ, the border between the two Korean states.

However, it took a decade and some major political changes to start the project moving. By the mid-1990s, Seoul realized that the collapse of North Korea was both unlikely and undesirable, since a German-style unification would be prohibitively costly. Hence, investment to the North and all kinds of direct and indirect aid came to be seen as a necessity by the new left-leaning administration of president Kim Dae-jung, who was elected in 1997.

That meant Chung Ju-yung’s plans received government support. He moved ahead with his characteristic energy, and in November 1998, the Kumgang project began to operate.

The idea was simple. The North Koreans agreed to create a sort of ghetto for South Korean visitors. A part of the Kumgang mountains was fenced off, with all the local population moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbor while the visitors ventured out for mountain walks and sight-seeing. Typically, a tour lasted for four days and three nights, and tourists lived onboard the cruise ship, which doubled as a floating hotel.

This clever scheme solved the problem of information flow, which was seen by Pyongyang as the major obstacle in its interactions with the South. North Korean commoners are supposed to believe that their South Korean brethren suffer under the cruel yoke of US imperialists. Understandably, their government does not want them to know that the per capita gross national project (GNP) in South Korea is 20 to 30 times higher than in the North. The sight of well-dressed South Korean crowds would be damaging for public morale and even political stability, but in the tourist scheme the rich southerners could be kept out of sight of average North Koreans, being accompanied only by a handful of carefully selected minders.

The South Korean visitors also had to behave themselves. They were warned that they could not criticize the North Korean system and its leaders, and that, in general, talking politics with North Korean personnel was not advisable. Transgressions could be punished.

In June 1999, Min Yong-mi, a 35-year-old housewife from Seoul, was engaged in talks with a North Korean minder. She told him a few words about South Korean prosperity and said something to the effect that North Korean defectors in the South were doing well. The reaction was swift: the talkative lady was arrested and spent one week in detention, accused of espionage. Of course she was not put into a real prison, but the ordeal was tough enough to undermine her health. There are good reasons to suspect that the entire affair was a deliberate provocation: the North Korean authorities were waited for something like this to happen to demonstrate that no quasi-political activities would be tolerated. They wanted to make an example of Min, and they generally succeeded: since then, tourists have become far more cautious.

Moneywise, the North Koreans were doing very well, too. The Hyundai Group built all the necessary infrastructure (presumably including the fences to keep the South Korean visitors under control), and also paid US$12 million every month as a fee for the use of the area. Some additional income was earned by North Korea through the sale of grossly overpriced local products and souvenirs.

Initially these conditions were accepted, not only because Chung Ju-yung was sentimental (and over-optimistic) about investment to North Korea, but also because a large tourist flow was expected. According to the above-cited sanguine estimates of 1999, by 2003 the numbers were supposed to reach the level of one million visitors per year – and then exceed them.

However, the plan did not work out as intended. Contrary to initial expectations, South Koreans were not too eager to spend their short vacations behind barbed wire. The early enthusiasm soon wore out, and from 2,000 the numbers of tourists began to decline. The trips were not cheap: the cost in 1998-99 was about 650,000 to 750,000 won (some $500-600 at the current rate). South Koreans soon discovered that for a similar amount of money they could visit China or even some parts of Southeast Asia, where apart from the scenery they would have some exposure to foreign cultures and would not feel under constant control and supervision.

The reformist drive of the Seoul government also contributed to the project’s mounting problems. Until early 2001, other subsidiaries of the mighty Hyundai Group were helping Hyundai Merchandise Marine, which initially operated the Kumgang Project. But as a result of government-initiated reforms of chaebol (conglomerates), the Hyundai Group was disbanded, after which independent companies of the former chaebol were not too eager to keep afloat a struggling project. In April 2001, Hyundai halved the number of trips to Kumgang and stated that the project would be discontinued due to the great loss of money.

Trouble in paradise
The government, however, could not allow this to happen; by that time the project had acquired huge symbolic importance. By 2001, the Kumgang project had become by far the largest intra-Korean economic operation, and the Kim Dae-jung administration, bent on keeping its “sunshine” engagement policy going, could not afford to lose the major symbol of such policy.

A rescue package saved the project from demise. The government-owned Korea National Tourist Organization was ordered to take part in the project and pay some of the overdue bills. The government also occasionally paid for generous discounts for many groups of people. For nine months in 2002, for example, the government paid 70% of the traveling expenses for elementary, middle and high school students, and 60% as well as all costs for students and teachers living in rural areas.

The North Koreans also demonstrated uncharacteristic flexibility when in 2001 they reluctantly agreed to accept payments depending on the number of tourists and the length of their stay, instead of the earlier fixed fee. Currently, these payments amount to $50 per tourist with a standard package of two nights, and $25 for a tourist who stays only one night.

Thus, the project survived the first crisis – only to be struck by a new one. This time, the reasons were political: the opposition uncovered evidence which showed that in order to secure Pyongyang’s agreement to participate in the North-South summit of June 2000, Seoul had secretly transferred $500 million to North Korea.

It was only logical that this clandestine money transfer was conducted with the involvement of Hyundai Asan. First, the survival of the corporation would be impossible without government involvement, and this meant its leaders could hardly say “no” when asked by the authorities to “help” in some delicate affair. Second, being the largest South Korean operation in North Korea, Hyundai Asan had both vested interests in intra-Korean detente and experience in dealing with money transfers of such kinds (there are some good reasons to suspect that the ill-fated “summit fees” were not the only clandestine money transfer to Pyongyang).

The discovery of the “summit bribe” led to a political scandal. An investigation ensued, and the then-head of Hyundai Asan, Chiung Mong-hun, the 55-year-old son of the conglomerate’s founder, found himself in the center of the scandal. He could not handle the stress. Amid mounting political pressures, he committed suicide by throwing himself out of his headquarters’ window on August 4, 2003.

Yet once again the Kumgang project survived the blow. In May of this year, Hyundai Asan stated it would probably make a profit in 2005. If that happens it will be the first time a profit has been recorded in the company’s history – of course, we are talking about ongoing costs and revenues, without considering the estimated $470 million that has been invested in the project so far. Nonetheless, it is clear that the situation has improved over the past few years, even if the actual performance would not be considered satisfactory in a less politically motivated project.

The improvement was brought about by the opening of a land route in 2003 that replaced the earlier cruises. Now, South Korean tourists board buses near the checkpoint and then travel to hotels operated by Hyundai Asan in the same Kumgang area. Currently, two hotels are operational, but the number will probably increase. The new tours can be shorter, with two nights being the norm. The new scheme also cuts down prices considerably, making the trip somewhat more attractive at 300,000 to 400,000 won (roughly, $350-$400) per person.

The basics of the tour remain unchanged, however: South Koreans are placed in a sort of ghetto, behind high fences carefully guarded by sentries. The tourists can shop for North Korean souvenirs, which are sold at exorbitant prices. It seems ant liquor and snake wine (with a real dead snake floating inside the bottle) are especially popular among males – both are believed to be good for virility. An acrobatics show and a hot spring are additional pleasures available for visitors – if they are willing to pay. A visit to the hot spring, for example, costs some $30, or about half of the average annual salary in North Korea.

Outside their hotels, tourists are constantly supervised by their North Korean guides, mostly young girls who are obviously selected for their good looks and, presumably, political reliability. There are some males as well, who dress in plain clothes. All guides are equipped with their Kim Il-sung badges, and are ever ready to deliver a well-rehearsed eulogy to the Great Leader and his son and successor, Dear Leader Kim Jong-il, in suitably exalted tones.

Combined with large iconic pictures of Kim Il-sung and Kim Jong-il on major crossroads and eulogies to their greatness carved in mountain rock, this creates a very bizarre picture of time travel: for one who wants to experience the feelings of visitors to Mao Zedong’s China in the early 1970s or Stalin’s Russia in the late 1930s, the place is worth a visit. Admittedly, not many foreigners rush to see the Stalinesque environment, long extinct elsewhere: even though formalities are kept at a bare minimum, only 0.5% of all visitors are foreign citizens.

Looking at the North Koreans present on the scene, one cannot help but wonder what is actually happening inside the heads of these highly privileged people, more often than not agents of the secret police or scions of well-connected families. The crowds of well-dressed, well-fed South Koreans contradict the official picture of the South as an impoverished domain of US imperialists and Japanese neo-colonialists. The selected few probably don’t ask questions, but they arrive at some conclusions no doubt.

However, this impact should not be overestimated. After all, the project was conceived in a way that allowed the impact of the South Korean visitors to be kept as low as possible. The number of North Koreans allowed to see these visitors is intentionally kept very low. Until recently, Pyongyang did not allow the Kumgang project to employ local personnel, and only recently have North Korean waitresses and cooks appeared at some restaurants and in one of the hotels. Their attitude vividly reminds this writer of the privileged Intourist hotel in Leningrad, which had the same air of unintended rudeness in dealing with its foreign guests, and great superiority in interacting with Soviet citizens. Nonetheless, at the Kumgang project, the presence of some 400 North Korean employees (excluding the guides and plain-clothed minders) is significant. However, most of the semi-skilled personnel are ethnic Koreans recruited from China – they agree to work for very low wages.

How will historians see the Kumgang project and the much-trumpeted “intra-Korean cooperation” in general? As a selfish attempt by affluent South Koreans to prolong the existence of a brutal dictatorship in order to save themselves from the troublesome necessity of paying for North Korea’s transformation? Or as an important contribution toward this transformation, a way to slightly open the closed doors of North Korean society and teach its inhabitants a thing or two about the modern economy and modern world? Perhaps they will see it as a way to support the expensive habits of the North Korean elite, or a way to ameliorate suffering of the commoners. We know not, but one thing is clear: business with North Korea is, first and foremost, a political affair, and this is unlikely to change in the foreseeable future.

BBC
4/26/2005

This week, a top insurance company charted the world’s most dangerous places to do business. Unsurprisingly, regions like Iraq, India and Russia were shaded brown on the “risk map”, marking them as at severe risk from terrorism.

But while most countries were classified as “guarded” risk or above, by Aon, the world’s second-largest insurance broker, it also highlighted, in a calming sage-green, a handful of states dotted round the globe which remain unaffected by the seemingly ever-present terror threat. So where could you go for a relatively risk-free holiday?

NORTH KOREA 

It might not be top of the White House’s favourite countries list, but for travellers North Korea is judged to be as safe as houses. Locals, however, have other problems to keep them occupied.

Amnesty International recently documented that the people of this country, which it called one of the most isolated on earth, have been suffering from acute food shortages and famine for the better part of a decade.

Let’s Go travel guides are written by Harvard University students but you don’t need a diploma from that august institution to know that access to the country – described as a festival of weirdness by a Let’s Go competitor – is extremely limited.

South Korean and US citizens can’t even obtain visas, and the UK Foreign Office seems to advise against visiting – without actually saying don’t do it. But like Aon, who gave it a safe rating, the FCO does point out that crime is extremely low and the likelihood of a terrorist attack is also pretty remote.

The British government does, however, recommend extensive travel and health insurance, and tells UK visitors to register with the embassy in the capital city of Pyongyang. It also warns that there has been an outbreak of avian flu.

If that doesn’t put off the most intrepid traveller, there’s this: “Perceived insults to, or jokes about, (North Korea’s) political system and its leadership are severely frowned upon. Foreigners have very occasionally found themselves caught up in criminal cases for not paying what is deemed to be sufficient levels of respect.”

“Oh, I so want to go there,” says travel writer Claire Boobbyer, who documented Vietnam – another very safe country as determined by Aon – for Footprint Travel Guides. “I just love communist countries. I like the fact that it’s so closed, and I’d love to see all the communist memorials, the memorials to the dear leader. It’s just the most closed society on earth, and that appeals to my curiosity.”

BBC
Lucy Jones
4/13/2004

“Got any nuclear weapons for sale?” is the response Briton Roger Barrett usually gets when he tells people at Beijing cocktail parties that he invests in North Korea.
The country’s admission to a nuclear weapons programme and its listing on George W Bush’s “axis of evil” means most people are staying well away.

But Mr Barrett, 49, a former troop commander in the British army who has 10 years experience of doing business in North Korea, recently opened a branch of his consultancy firm, Korea Business Consultants, in Pyongyang.

A self-confessed “business adventurer”, he says there is growing interest in the country after Chairman Kim Jong-il introduced economic reforms in 2002.

It’s like China in the eighties… The market reforms are very evident. It’s an exciting time to join the market.

Robert Barrett, Korea Business Consultants 
He is also the enthusiastic publisher of what must be North Korea’s only business publication – the DPRK Business News Bulletin – which features some of the 250 companies he advises.

“It’s like China in the eighties… The market reforms are very evident. It’s an exciting time to join the market,” he says.

Mr Barrett is not alone.

Even in the middle of a nuclear crisis there are foreign investors in the country, and their numbers are increasing.

They say North Korea is a mineral rich country that needs everything and insist they have to get there first.

They also believe the 2002 economic reform is for real and that the country is gradually moving towards becoming a market economy.

Poverty

The little data there is on the country’s economy is hardly encouraging, though.

There has been a devastating famine and the UN says malnutrition is still widespread.

There are chronic heating and water shortages, and most North Koreans are paid less than £5 a month.

The country also has an appalling human rights record.

A BBC documentary on the country’s gulags this year contained allegations that chemical experiments are being carried out on political prisoners.

Meanwhile, the US says it is “highly likely” that North Korea is involved in state-sponsored trafficking of heroin.

In the political arena, the second round of six-nation talks aimed at resolving the nuclear crisis ended in Beijing in February without agreement, which means US and Japanese sanctions will remain in place.
‘Communism’ tourism

But the foreign entrepreneurs in North Korea are not put off.

Some are helped by UN employees who have worked in Pyongyang (among the few people to have had contact with the regime there) and many have a track record in China.

Pack a torch, conduct business meetings on the street to avoid big brother listening in and have plenty of “Asian patience” for the endless red-tape, they advise.

An Austrian company is reportedly buying pianos from the North Koreans, a French television station uses North Korean artists to produce cartoons, while a Singapore-based firm is developing forestry and tourism.

The Singaporeans intend to offer “adventure” stays on their North Korean forestry plantations.

Meanwhile, Western tourist agencies are gearing up to offer the last chance to see communism in action, and Fila and Heineken have reportedly entered into sponsorship deals with the North Korean regime.

North Korean labour

A German, Jan Holtermann owner of the computer firm KCC Europe, is putting North Korea online.

He hopes that by being there first he will be able to eventually tap into North Korean computer talent.

The country’s small number of internet users currently dial-up to Chinese providers, a costly process at about £1 a minute.

Mr Holtermann’s customers, who he hopes will number 2,000 by the end of the year, will have unlimited access for £400 a month.

As only a few North Koreans are permitted to have telephones, and as the internet service is costly, Mr Holtermann expects his customers to be government ministries, news agencies and aid organisations.

He has invested £530,000 in the venture, intending to get first pick when North Korean software programmers come onto the market.

“They are very talented,” he says.

“It’s this capacity we want to sell in Europe.”

The parcel delivery company DHL has operated in Pyongyang since 1997, when it was invited there by the government, and now has North Korean light manufacturing, textile and beverage companies on its books.

It sees itself as contributing to the country’s “slow but increasingly visible” economic reform programme.

British consultants

Former bank employee Mr Barrett is convinced North Korea is opening up much quicker than people think.

There are opportunities in banking, minerals, agriculture and telecommunications, he insists.

“There is the odd story of something going wrong,” he says.

“But when you walk around you notice construction going on.

“The people are feeling a change.”

High level contacts

But how to do business with one of the most isolationist regimes on earth?

Contacts are essential, say businessmen.

Though even knowing a North Korean minister is not enough, says Gerald Khor of Singapore-based forestry company Maxgro Holdings.

“You have to go above the ministers to the cabinet. You don’t have to know a member but you need to know people who can influence them,” he says.

“It is very important to get the favour of the dear leader (Kim Jong-il). Because when he says something, it gets done.”

Through a former UN employee, Maxgro got Kim Jong-il’s attention and has invested $2m in forestry, agreeing the state gets 30% of the profits.

“Kim Jong-il is an environmentalist,” Mr Khor says.

“We are confident we’ll get a return.

“We have dwindling supplies and this is high quality wood.”

To locate the forests elsewhere would cost much more, he adds.

Forced to change

Economic reforms introduced by the government in 2002 are seen as the first move away from central planning since the country adopted communism in 1945.

The government has been forced to change in order to survive, especially now it can no longer barter with Eastern Europe and the former Soviet Union, experts say.

“There is no real option not to carry out these reforms,” says UK-based Keith Bennett, who has taken trade missions to Pyongyang.

“But people don’t know where they will lead.

Chinese leaders have impressed on Kim Jong-il that there can be economic reform without fundamental political change.”

Way up on North Korea’s border with Russia and China is the Tumen economic zone, which was established in 1991 with UN help to lure investors.

The project has only had limited success and may indicate the type of problems those investing elsewhere in North Korea may face.

The North Korean section of the zone, Rajin-Songbong, hosts foreign-run hotels, telecommunications and restaurants, but that is about all.

“The North Koreans have sometimes been very co-operative and sometimes not, maybe because of policy change,” says Tsogtsaikhan Gombo, from the UN’s development agency.

“They were also disappointed when they didn’t see the investment.”

Vibrant Chinese economic zones nearby have put up fierce competition.

But even opening the door just slightly to let in capitalism has greatly improved the lives of the 150,000 people living in the zone, says Mr Gombo.

And many foreigners insist that small investments elsewhere in the country may have similar results.

Accoding to the Washington Post:

By Anthony Faiola
Washington Post Foreign Service
Tuesday, December 2, 2003; C01

MOUNT KUMGANG

In the surreal world of North Korean tourism, you can feast on local delicacies served by glamorous lady comrades, watch an acrobatics show infused with Stalinist humor and climb a storied mountain covered with plaques and monuments celebrating the totalitarian Kim clan.

But be back indoors by the midnight curfew — or face fines, questioning by authorities or, well, worse.

This is Mount Kumgang, the fortified tourist compound where the Hermit Kingdom meets the Magic Kingdom, right down to Disneyesque guys in fuzzy bear suits greeting visitors. A window into hermetically sealed North Korea since foreign visitors were granted limited access five years ago, it lies an hour’s drive north of the minefields and missile batteries lining the most heavily militarized border in the world.

Here, tension is part of the attraction.

“Look, quick! North Korean soldiers!” one excited South Korean yelled to other tourists on a bus after spotting an armed squad marching by. They tripped over each other trying to get a better view.

The over-the-rainbow quality of the place offers a rare, if hyper-controlled, glimpse at life on the Cold War’s last frontier.

“You are supposed to relax and have a good time,” said Jang Whan Bin, senior vice president of investor relations at Hyundai Asan Corp., the South Korean company that financed and operates most of the resort. “But this is still North Korea. Things are quite different here.”

On this mountain, about which the famous Chinese Sang Dynasty poet Sudongpo wrote, “I would have no regrets in my lifetime were I to see Mount Kumgang just once,” the jagged cliffs and glistening waterfalls now take a back seat to homages erected to the Kims, the only father-and-son act in Stalinist history.

More than half a century ago, Kim Il Sung founded the Democratic People’s Republic of Korea — i.e., North Korea. His son, Kim Jong Il, took the helm following the elder Kim’s death in 1994. The son is said to have entered this world on a mountaintop, his birth heralded by lightning bolts and a double rainbow. Recently named “Guardian of Our Planet” by the North Koreans, Kim Jong Il rules through a cult of personality that is alive and well in Mount Kumgang.

No act of the Kims is too small to be noted on these ancient rocks, now coated with more than 4,000 monuments, etchings and other commemorative inscriptions to the clan. A spot where Kim Il Sung is said to have especially appreciated the view is dutifully marked with a six-foot-tall stone tablet. Elsewhere a young guard stood by an etching commemorating the exact location where Kim Jong Sook, mother of the younger Kim, once rested her weary bones.

This is an important landmark, insisted the female guard, who watches over foreign visitors and keeps out unauthorized North Koreans. Her eyes went wide when asked about the need for a monument in a place of such natural beauty.

“She was the beloved wife of the Great Leader!” fumed the guard in her fashionable red jacket with a matching propaganda pin bearing Kim Il Sung’s face. “Don’t you have a father? Isn’t he the absolute ruler of your family? Mustn’t he be obeyed? You must understand, Kim Il Sung is the father of our nation and we are his children. Everything related to him must be celebrated.”

“Including his wife?” she is asked.

“Do not just call her his wife! Use her title!” she demanded.

What title?

“Her title! How can you not know her title?” Exasperated, the guard explained that Kim’s wife must be referred to as “Great Revolutionary General Kim Jong Sook.”

Most of this sprawling tourist complex, including hotel, hot springs and duty-free shops including Prada and Gucci, is run by Hyundai Asan, which each month brings in about 15,000 people, mostly South Koreans. The North Koreans feared so many foreigners would contaminate the minds of the locals, so the vast majority of employees here are ethnic Koreans shipped in from China.

But two restaurants do employ local staff, and it’s there that foreigners have their best chance to interact with unarmed North Koreans. Waitresses wear ’50s-style heavy makeup and modest attire. One nervous server fled from a table of foreigners every time she was asked a question. In another restaurant, a waitress looked stunned after a foreign guest asked her where one could buy a Kim Il Sung lapel pin like the one she wore.

She tilted her powdered face skyward, raising one arm to gently cup the pin with her hand.

“This,” she proclaimed, “is not fashion. It cannot be bought in a store.”

She went on: “This is a symbol of my love for the great founder of my nation.”

Among the top attractions here is an acrobatics troupe shipped in from Pyongyang.

In one act, a disco version of the North Korean folk favorite “Nice to Meet You” plays as 10 men in stylized sailor suits, heavy rouge and blue eye shadow soar in front of a projected backdrop of sacred Mount Paektu, where Kim Jong Il is said to have entered the world with the blessing of Heaven. In a comedy act, a strongman wearing communist red gets the better of a weakling decked out in blue.

Lest the mountains, lakes and tourist attractions lull you into a false sense of security, officials constantly remind guests that they are surrounded by a military installation that includes a naval base across the port from where a small cruise ship docks each week. Visitors are instructed not to talk to the locals about politics or economics. Two years ago, one South Korean woman merely suggested that her nation, which is 13 times as wealthy as the communist North, had a higher standard of living. She was arrested and held for seven days until Hyundai negotiated her release. Photos here are limited to shots of the tourist installations and specified views of Mount Kumgang itself.

There are no exceptions.

One Dutch visitor captivated by the serenity of the scene snapped a digital photo of the mountain setting with a happy sign in the background declaring “Welcome to Mount Kumgang.” But she inadvertently clicked just as two North Korean soldiers with sidearms were walking by.

“Hey, you!” they barked in Korean. “Come here!”

“The soldiers were not amused,” said Eunmi Postma, a Dutch journalist based in Seoul.

They demanded the tourist’s camera and asked to see her passport.

“But, I mean, all I did was try to take a picture of the welcome sign,” she said. “The soldiers were so far away you couldn’t even make them out in the photo. I finally deleted the picture so they wouldn’t take my camera.

“I know it’s North Korea, but still, this is supposed to be a tourism resort. . . . What a weird place.”

BBC
Charles Scanlon
9/15/2003

A hundred South Koreans are visiting the North Korean capital, Pyongyang, for the first time since the peninsula was divided in 1945.

They left on the first commercial flight between the two Korean states.

South Korean tourists have already travelled to an isolated mountain resort in North Korea in recent years, but this is the first time they have been able to see the capital of the communist state.

Nearly 120 people signed up for the five-day tour, at nearly $2,000 a head.

For that they will be able to see monuments to the ruling Kim dynasty, visit a model farm, the railway station and see a state-run kindergarten.

A company official said the idea was to let South Koreans see how Northerners live.

But they are not expecting to be allowed much contact with ordinary citizens.

Despite growing economic links, the North Korean regime goes to extraordinary lengths to block outside ideas and information.

One of the tourists said she had not been able to see relatives in the North for half a century, and did not expect to be allowed to see them during the visit.

Another, a professor of North Korean Studies, said he hoped the visits would help unification.

The travel company, Pyeonghwa, is an affiliate of the Unification Church of Moon Sun-myung, which recently opened the first car assembly plant in North Korea.

It hopes to take 2,000 visitors to Pyongyang before the end of the year.

BBC
2/5/2003

The two Koreas have re-opened their land border for the first time in half a century, despite continuing anxiety about the North’s nuclear programme.

About 100 South Korean tourism officials passed through the heavily fortified frontier by bus on Wednesday, travelling to the scenic Mount Kumgang tourist resort, some 30 kilometres (18 miles) to the north.

The opening of the first of a set of planned overland links came as the US made its strongest pledge yet to hold direct talks with the North to resolve the nuclear crisis.

North Korea says that the only way forward is for face-to-face talks with Washington, without pre-conditions.

Historic crossing

Buses carrying around 100 officials from the South Korean company Hyundai and invited guests snaked from Kosung on the South’s east coast for a 50-minute journey along a dirt road towards Mount Kumgang.

The 10 buses were escorted by a South Korea military jeep as far as the border.

The jeep then pulled over to allow the buses to make the historic crossing, and a military official from the US-led United Nations Command, which enforces the armistice agreement that ended the Korean War, followed their progress on the other side of the border through binoculars.

If the pilot visit is a success, tours will officially begin next week.

The road is the first of four planned overland routes between the two sides to be completed. A parallel rail link on the east, and a rail and road link on the west are still under construction.

Diplomacy

The links are a key part of South Korean President Kim Dae-jung’s “sunshine policy” of economic co-operation with the Stalinist state.

Seoul has been urging the US to pursue diplomacy rather than sanctions over the current nuclear crisis.

US Deputy Secretary of State Richard Armitage on Tuesday gave a strong assurance that direct talks with Pyongyang would take place.

“Of course we’re going to have direct talks with North Korea. There’s no question about it,” he told the Senate Foreign Relations Committee.

But Mr Armitage said that the consultations would only take place when Washington was confident that it had built a “strong international platform” from which to end North Korea’s nuclear programme.

He also warned that North Korea’s reported moves toward restarting a plutonium reprocessing facility could enable it to build four to six nuclear weapons within months.

Despite Washington’s assurances that it has no plans to invade North Korea, it has announced that is considering strengthening its military forces in the Pacific Ocean as a deterrent against Pyongyang.

US officials said the reinforcements would help signal that a possible war with Iraq was not distracting the US.

But the commander of the 37,000 US forces in South Korea, General Leon LaPorte, stressed on Tuesday that any deployment would be made in conjunction with Seoul.

Economic co-operation

Some analysts believe the nuclear stand-off is simply a blackmailing tactic by the North to obtain more aid for the impoverished nation.

In easing the North’s economic plight, Hyundai has played a key role. It has hitherto organised cruises to the North by boat, but they have lost the company money.

Hyundai hopes the cheaper overland trip will attract more tourists.

But its role in inter-Korean co-operation has not been without controversy.

The company became embroiled in a scandal last week when government auditors revealed that a Hyundai affiliate had sent nearly $200 million to North Korea just before the 2000 inter-Korean summit.

The company said the money was used to finance its business projects in the North; opposition lawmakers allege the money was a pay-off for the summit.

Members of the ruling Millennium Democratic Party have called on President Kim Dae-jung to make a public statement, while opposition politicians are calling for an independent counsel to investigate the fund transfers.