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  March 30,  

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The Koreas

Hyundai and North Korea: What now?
By Aidan Foster-Carter

Since last year's inter-Korean summit, it's no longer so rare for North Koreans to visit Seoul. But this was special. On March 24, Song Ho-gyong, vice chair of Pyongyang's Asia-Pacific Peace Committee, flew down for the day. He brought a wreath two meters tall, and a personal message from Kim Jong-il. For the first time ever, the North officially honored a South Korean: the late great Chung Ju-yung, the larger-than-life founder of the Hyundai conglomerate, who died last week of pneumonia aged 85.

Gestures like this count. It reassures South Koreans to see the North observing Confucian proprieties. When Kim Jong-il first met Chung Ju-yung in 1998, the Dear Leader's deference to the older man - as later to Kim Dae-jung at their summit - played well in the South. Not that Pyongyang's manners are consistent. On March 19 it rudely pulled out of talks with Seoul, the very day they were due to start.

Nor have the politics of funerals always been so positive on the peninsula. In July 1994, then Southern president Kim Young-sam was poised for the first ever North-South summit when Kim Il-sung suddenly died. A wise leader would have at least sent condolences. A wily statesman would have offered to go to the funeral: what better way to seize the initiative? Instead YS, whose judgment then was no better than it is now - he's become a loose cannon on the right, currently trying to block Kim Jong-il's return visit to Seoul - put Republic of Korea forces on alert, angering the North and sending relations back to square one.

By contrast, the bluff businessman Chung Ju-yung did more than any politician until Kim Dae-jung for inter-Korean reconciliation. Himself northern-born, 30 years before the peninsula's 1945 partition, his first foray into the Democratic People's Republic was back in 1989. Even then Chung had tourism plans for Kumgangsan - the famously scenic Diamond Mountains just above the DMZ, near his home village of Asan - whence in the 1930s the teenage Chung had run off to the bright lights of Seoul, taking money his dad was saving to buy a cow. Koreans cherish their local roots: in Chung's case, with a tinge of guilt for his unfilial act.

But 1989 was too soon. Chung didn't get to see Kim Il-sung, and neither government would give him the green light. Fast forward to 1998, and that famous convoy across the DMZ bearing Chung and 500 cows: "Sorry, dad" in capital letters. Corny maybe, but brilliant political theater, again using a cultural language all Koreans can relate to. Chung met Kim Jong-il, and got to run cruise tours to Kumgangsan - at a price. Hyundai agreed to pay almost US$1 billion over six years in fees alone, plus all costs for building ports, roads and facilities. It also accepted other loss-leaders, like a $50 million gym in Pyongyang.

At $12 million a month, paid in Macau, these tour fees are a major source of foreign exchange for the North. Hawks in both Seoul and Washington worry that Pyongyang may be using this subvention to buy arms.

Politically, Kumgangsan was the breakthrough that made the summit possible. In just over two years, 300,000 South Koreans have seen at least a slice of the once forbidden North. Incidents have been rare. North and South found they could do business without the sky falling. That laid a crucial basis of trust. But Chung Ju-yung had bigger plans, and needed to make, as well as spend, money. He sought to build a huge industrial estate near Haeju, a short ride from Seoul's port of Inchon, with output worth $20 billion a year: 20 times more than North Korea's total exports now. But the North Korean army jibbed, and Kim Jong-il tried to persuade Hyundai to go instead to Sinuiju, way up on the Chinese border, with higher logistics costs.

Fast forward again to summer 2000. All is not well in Korea's biggest business group. The patriarch is ailing, his sons are feuding, finances are rocky, and government is pressing Hyundai to clean up its act. Where does Chung Mong-hun, favorite son and heir, go for help? To his good friend Kim Jong-il, of course - and gets it, in spades. No more Sinuiju. Now Hyundai has a dream site near Kaesong, the old capital almost on the DMZ - just an hour from Seoul, to which it could be as Shenzhen is to Hong Kong. Suddenly Hyundai is back in favor: state banks flip from harrying the group to bailing it out. Moral: A new pan-Korean political economy is already emerging. Great for peace, but not so good for reform.

But what now? The Kumgang tours are bleeding red ink. Hyundai is trying to halve the monthly fee, and since Chung Ju-yung's death the North may agree to this. Even if the tours cease, they have done their job as a catalyst. Kaesong is the issue now. If this goes ahead, the DMZ will start to morph from front line to front door: a huge leap forward for peace, even if Pyongyang remains reluctant to discuss security issues formally. All this is far too crucial to be left to Hyundai, whose finances remain dire and which may now break up as Chung's sons each take a piece. Enter Korea Land Corp (Koland), a South Korean state firm, which has quietly bought into the Kaesong project to ensure it stays afloat. So now it's up to Kim Jong-il to keep his word. Nothing is yet happening at the Kaesong site. How far or fast it moves in the months ahead will be the best single barometer of the overall Korean peace process.

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