Group: Most inter-Korean businesses end badly
After North Korea threatened to cut off its business relations with Hyundai Asan, a civic group here claimed yesterday that most South Korean companies which had established joint ventures with the North have suffered perennial losses.
The Forum for Inter-Korea Relations, a coalition of civic groups focusing on inter-Korean economic exchanges, said most of the 1,000 South Korean companies that forged business deals with the North had either declared bankruptcy or given up mid-venture. The number of inter-Korean joint ventures continued to grow after the June 2000 summit between the two Koreas, but many of the firms have performed poorly. The Korea Institute of National Unification conducted a survey earlier this year of 150 South Korean firms that had traded with the North, and 45 companies said they ceased business within six years of its launch.
In another survey, 30 percent of the 241 firms which operated factories in the North said they also shut down in the first year of business. Only 22 firms continued business for more than five years.
In addition to small-scale joint ventures, South Korean conglomerates also suffered from the peculiar nature of doing business with the communist regime. Daewoo built a clothing manufacturing facility in the North in 1996, but stopped its operation in 1999 after losing more than $10 million annually. Hyundai Asan, in its seven years of operating tours to Mount Kumgang, recorded hardly any profit.
“North Korea’s attitude is extremely disappointing,” said Nam Sung-wook, an economics professor at Korea University. “The North has no respect for basic business ethics and, by threatening Hyundai Asan, it made a bad bet. It may see short-term gains, but in the long term, no one will want to do business with it.”
Hyundai Asan yesterday said its officials, scheduled to visit Pyongyang today for talks to discuss the firm’s new tour program to Mount Paektu, were unable to leave as planned because the North did not invite them. Meanwhile, Kim Yoon-kyu, fired from the business’s leadership on charges of embezzlement, is expected to return to Seoul from China today.
by Ser Myo-ja