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     Dec 23, 2008
Orascom gets into pyramid business
By Donald Kirk

SEOUL - An Egypt-based conglomerate with interests throughout the Middle East is moving to fill the void left by the failure of South Korea to strike up viable relations with North Korea after a decade of attempts at reconciliation by the last two South Korean presidents.

While South Korean access to the industrial complex at Kaesong has been drastically curtailed, North Korea's elite started this month to have access, courtesy of Orascom group, to mobile telephone services available elsewhere in the region while the


company also signed up to a project to provide basic banking facilities in the country.

Orascom Telecom, by far the leading mobile phone provider in northern Africa and the Arab world, is investing US$400 million in setting up a service named Koryolink over the next four years, beginning in the capital Pyongyang then reaching out to cities elsewhere. No sooner was the mobile service initiated last week than Orascom Telecom entered a joint venture with North Korea's foreign trade bank to open up Ora Bank as the country's second foreign-invested banking facility.

North Korean officials until now have had to deal with an antiquated landline telecommunications service in contrast with modern systems used by their trading and diplomatic partners in China. North Korean leader Kim Jong-il finally gave the nod to the 3G mobile-phone deal with Orascom Telecom, signed nearly one year ago, giving the Cairo company 75% ownership of a subsidiary in which North Korea's state postal system owns the remaining 25%.

Orascom Telecom's debut in North Korea, however, remains a high-risk venture that comes with a daunting downside.

The company's announcements last week failed to mention the obligation it has incurred to finish one of the planet's most glaring fiascoes, the appropriately pyramid-shaped, 105-story Ryugyong Hotel. A stunning eyesore on the Pyongyang skyline, the Ryugyong has been the capital's most spectacular sight since construction stopped in 1992 as the country plunged ever-deeper into economic chaos, famine and disease.

Orascom Telecom, moreover, faces a deadline that helps to explain why its mobile telephone contract guarantees exclusivity for only four years. While the company's license technically runs for 25 years, the hotel has to be ready to open by April 15, 2012, the 100th anniversary of the birth of the nation's "eternal president", Kim Il-sung, who died in July 1994.

Orascom managers in Pyongyang have talked of the condition that presents the group with a challenge far beyond that of setting up the mobile-phone service. They're well aware the 25-year licensing agreement will be meaningless if they're unable to rescue the hotel project.

Orascom Telecom's sister company, Orascom Construction, one of the Middle East's biggest builders, might have been expected to be responsible for building the hotel, but Telecom got stuck with it as a condition for the mobile-phone deal. The Orascom group's other major company, Orascom Hotel and Development, will be likely to get the contract for managing the hotel, though that deal is far from definite until or unless the hotel nears completion.

The arrival of a mobile-phone service into North Korea comes several years after North Korea banned as a security risk the use of mobile phones tied to Chinese networks. North Korean customs officials confiscate cell phones from visitors as they enter the country, logging them and returning them for pickup on departure. Security officials automatically imprison, torture and sometimes execute North Koreans discovered to be using cell phones linked to South Korean or Chinese networks.

Even after Orascom Telecom's service gets going, use of cell phones is certain to be a privilege enjoyed only by those with power and influence - and, of course, by military and security units.

Nor is the Ora Bank likely to be able to do much more than handle the accounts of foreigners' interests in North Korea and North Korean trading companies. The only other foreign-invested banking facility, Daedong Credit Bank, a joint venture with British investors and managers, is in business to expedite the flow of funds on behalf of foreign investors, not North Koreans.

The success of Orascom in getting into North Korea may also be an object lesson to South Korea's conservative government. North Korea has rebuffed South Korean attempts to ease access to the Kaesong industrial complex, a few kilometers north of the demilitarized zone separating the two countries, in which nearly 90 South Korean companies have set up factories staffed by 36,000 North Korean workers.

North Korean officials say they won't let up until South Korea's government meets the North's demands on a wide range of issues, including reaffirmation of promises made by the previous government for massive investment in the country's infrastructure. Suspension of most access to Kaesong, in effect since December 1, has wiped out the prospect of more South Korean investment in the zone and also discouraged South Korean interests from considering investment elsewhere.

Orascom's deals with North Korea, however, offer no sure guarantee of paying off for Orascom as long as North Korea insists on completion of the Ryugyong as a tribute to Great Leader Kim Il-sung, who envisioned it as the tallest building in Asia.

Experts warn that completion of the Ryugyong, literally "capital of willows", after the trees that grace the banks of the Daedong River and the city's broad streets, may be an impossible dream. Some of the concrete is rotting, say foreign consultants, and elevator shafts are off-center. Those are just a couple of the myriad problems, great and small, encountered as engineers, technicians and construction workers see what they can do to turn the dream into reality.

The worst problem, however, may be that of propping up Kim's son and heir, Kim Jong-il, long enough for him to be able to show his face at his father's big birthday bash - and possibly even manage a wave. North Korea has been putting out a steady stream of photographs to refute reports that Kim suffered a stroke last summer and may have had surgery, but he's not seen in motion on video. Nor has he been up to receiving foreign visitors who might report if his words were slurred or his left arm immobilized, as analysis of some of the photos has indicated.

Ideally, the North Korean media mill should be expected to put out photographs of Kim Jong-il visiting the site while giving the kind of "on-the-spot" guidance that he has so often dispensed in forays to military units, factories and farms. So far, however, Kim has not been reported, much less seen, telling workers what to do about building the Ryugyong, whose 3,000 rooms, offices, restaurants, nightclubs and banquet halls remain hollow shells.

Orascom managers and engineers aren't talking about warnings that it might be better to tear the hotel down and start again. No one wants to think about the impact of the controlled explosion needed to reduce the Ryugyong to a pile of rubble. The notion of blowing it up appears about as repugnant to Kim Jong-il and the relatives and military men who rule on his behalf as dismantling the country's nuclear complex or disposing of its warheads.

Under the circumstances, who can imagine the hotel, begun as a gigantic symbol of grandeur, crumbling in a cloud of smoke as a symbol of political and economic failure? As long as Kim Jong-il lives, the hotel, like the country's nuclear program, must endure as a symbol of the pride and glory embodied in the dreams of the father.

Completion of the hotel would provide the icing on the cake for the centennial birthday celebration - and ensure the long-term survival of Orascom Telecom's deal to bring phone service to a society still largely cut off from the country's highly connected neighbors.

(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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