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Dream of Mt. Kumgang Turns into Nightmare for Hyundai Asan

Thursday, July 28th, 2011
mount kumgang

Few natural wonders are more distinctive than Mount Kumgang, that is, Diamond Mountain, in the southeastern corner of North Korea. Looming a few miles above the eastern end of the demilitarized zone that has divided the Korean peninsula since the Korean War, Kumgang is not one mountain but several thousand crags of granitic rock jutting up in spire-like formations of widely differing shapes and sizes. The possibilities for hiking and climbing among them are almost as numerous, most of them unexploited if not unexplored.

For the late Chung Ju-yung, founder of the Hyundai empire, Kumgang was a dream that beckoned long after he had run away from his home in a nearby village named Asan to seek his fortune in Seoul during the Japanese colonial era. For him, Kumgang stood not only for Korean reunification but also for penetration into the North for South Korean business and industry. One of his proudest achievements, three years before he died in March 2001, was to open up tourism by boat from the South Korean port of Donghae to a small port near the base of Kumkang built by Hyundai Engineering and Construction, the mother company of his empire.

Soon, however, the dream turned into a nightmare that epitomizes the frustrations of gaining significant entrée into the North. No company has suffered more than Hyundai Asan, founded by Chung to build up facilities at Kumgang as well as the Kaesong Industrial Complex at the ancient Koryo capital of Kaesong, beside the ‘truce village’ of Panmunjom north of Seoul. Named for his native village, Hyundai Asan has invested well over US$1.5 billion in both Kumgang and Kaesong. The payoff for the Kumgang deal has been tragedy, bankruptcy – and, most recently, North Korea’s announcement that it is abrogating its contract and taking over all Asan’s operations at Kumgang.

The downfall of the Kumgang program bears a discomfiting parallel to the continuing frustrations over the past two decades in getting North Korea to do away with its nuclear program, as promised in a NorthSouth denuclearization agreement in 1991. The sense is that failure follows hope in a pattern in which North Korea forever finds ways to violate all agreements, diplomatic or commercial. What could have been more devastating than the failure of the 1994 Geneva agreement under which North Korea made a show of shutting down its nuclear weapons program in exchange for the promise of twin nuclear energy reactors to fuel its failing economy?

When that agreement flew apart eight years later with the discovery that North Ko rea had a separate, secret uranium enrichment program, Hyundai Asan was bringing thousands of South Korean and foreign tourists every week to Mount Kumgang. On the way, they witnessed the construction by South Korean companies of a single-track railway paralleling the newly paved road into North Korea – the partner of another line from the South to the Kaesong complex. Hyundai Construction did most of the new construction while Hyundai Merchant Marine ferried the tourists up the coast, all under the aegis of Hyundai Asan.

All seemed to be going well when Chung Ju-yung’s fifth son, Chung Mong-hun, as chairman of Hyundai Asan, persuaded the North Koreans to open the way by relatively fast, cheap tours to Kumgang by road rather than by boat, which cost more and took longer. Here was living proof of the success of the ‘sunshine’ policy that Kim Dae-jung, president of South Korea from 1998 to 2003, had propounded when he flew to Pyongyang in June 2000 to meet North Korean leader Kim Jong-il for the first inter-Korean summit. The dream turned tragic, however, when Chung Mong-hun jumped to his death from the Hyundai headquarters in Seoul in August 2003 amid investigation into Hyundai Asan’s funneling hundreds of millions of dollars to North Korea to get Kim Jong-il to agree to the summit.

Chung Mong-hun was also said to have been depressed by the troubles of Hyundai Construction, forced into bankruptcy in 2001 partly as a result of heavy losses on Kumgang. A decade later, the core Hyundai Group of Mong-hun’s widow, Hyun Jeongeun, was still judged not to have the funds to buy Hyundai Construction back. Instead, the creditor banks this month sold it to the booming Hyundai Motor Group, spun off to Chung Ju-yung’s oldest son, Mong-koo.

Chung Mong-hun’s passing, however, was not the only tragedy surrounding the Kumgang project. On July 11, 2008, a 53-year-old South Korean housewife, Park Wang-ja, was shot and killed by North Korean soldiers after she wandered outside the fence surrounding the tourist zone to gaze at the sunrise. South Korea’s President Lee Myung-bak, suspending tours to Kumgang, insisted the South investigate the killing. North Korea refused while North-South relations spiraled downward after the South cut off the donations of rice and fertilizer that Kim Dae-jung and his successor, Roh Moo-hyun, had showered on the North for a decade.

The standoff on Park’s death assumed a broader symbolic significance as President Lee demanded the North give up its nuclear program as a prerequisite for aid. The abrogation of North Korea’s agreement with Hyundai Asan on Kumgang may portend the end of occasional ‘reunions’ of divided families, agreed on at the June 2000 summit, that North Korea said had to be held at Kumgang. Stilted affairs, monitored by the North Koreans, these reunions offered brief solace to those lucky enough to go but provided a cruel reminder of the sorrows of millions who died without seeing their loved ones again.

My own memories of Kumgang go back to 1995 when I went there with a group of Korean-Canadian tourists from the North Korean side after attending a bizarre “sports and cultural” festival in Pyongyang featuring professional wrestlers. The facilities had much improved, but the basic tour route had hardly changed when I went from the South Korean side by boat four years later and then again by land in 2004. You hiked several miles above a stream leading to a waterfall. You were taken to look at ‘Sea Kumgang,’ outcroppings in the sea that look like a miniature version of Mount Kumgang. You got to see a circus featuring high-wire trapeze artists in glittering attire. And the same guides warned of fines and worse for anyone spied littering the trail with a speck of trash.

Under the circumstances, Kumgang was not exactly a destination for relaxation, much less exploring on your own or, after one visit, seeing anything new. Still, Kumgang represented an opening. Instead of fulfilling Chung Ju-yung’s dream, however, the Kumgang experience shows how clouded was the vision.

If the fantasy of North-South harmony endures, the reality is that of frustration for Hyundai Asan, for North-South commerce, and for talks on the North’s nuclear weapons. The lesson of Hyundai Asan is that no business can be confident of success in dealings with the current regime in the North -- just as no trains are running on those new tracks that I’ve seen glistening beside Hyundai-built highways to both Kumgang and Kaesong.

Still, the outlook is not entirely bleak. The Kaesong Industrial Complex may not be a tremendous money-maker but has shown enough promise for 120 small and medium-sized South Korean companies to set up light industrial units there employing 55,000 North Korean workers. Hyundai Asan and the Land and Housing Company, a subsidiary of a South Korean government agency, jointly “own” the land – that is, North Korea sold it to them in a complicated deal in which the North reaps most of the profits in the form of wages paid to North Korean workers and payment for the rights to do business there.

As at Kumgang, North Korea can take over the Kaesong complex any time an incident explodes into a standoff or crisis in North-South Korean relations. Nonetheless, the profits the North reaps from Kaesong are important enough for the cash-strapped regime not to want to risk complete disruption. The detention of a South Korean worker for Hyundai Asan, charged with trying to tempt a North Korean waitress to flee to the South, and obstructions to access on the highway across the line from the South to the complex have made headlines but not stopped production. The betting is that the complex will endure simply because it’s a sure source of funds for North Korea.

Similar considerations offer some hope for resumption of tours to Mount Kumgang from the South Korean side. North Korea claims to have taken over properties to which it had granted ownership rights to Hyundai Asan, including a luxury hotel with hot spring bathing facilities, a shopping mall, a power plant and a road into the tourist zone. Hyundai Asan also built and legally “owns” the small port that originally carried tourists from Donghae to Kumgang. The problem for North Korea is that tourists are not coming in large numbers from China to Kumgang. It is not an enticing destination for Chinese or for other foreigners who may want to go to take a look at the North Korean capital of Pyongyang but do not have the time to for a side trip to Kumgang.

Hyundai Asan, attempting to recoup its losses on Kumgang by diversifying into other businesses in South Korea, still enter tains hopes that North and South Korea will manage to reconcile some of their differences enough for tours to resume from the South. Might North and South Korea come to face-saving terms after Lee steps down as president and a new president, perhaps more inclined toward reconciliation, takes over in February 2013? In the meantime, a Hyundai Asan official blames the standoff on “the hard-line stance” of both sides. “In the near future, we are trying to resume our business,” he says. “It will take a little time,” but “we are prepared for any situation.”

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