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
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
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
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
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
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
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.