Save Mt. Kumgang ToursThe tourism business of Mt. Kumgang, which has been an important element of the government''s "Sunshine Policy" toward North Korea, is apparently facing great difficulties. This is because of long-standing financial problems besetting the Hyundai Group, which has been the ambitious promoter of this particular project over the years. While trying to keep the business going, Hyundai is reportedly considering renegotiating with North Korea to reduce payments and to work out other measures to facilitate business.
The current contract between Hyundai and North Korea dictates that Hyundai pay a fixed sum of $942 million to North Korea by 2005, regardless of business performance. The plan for the renegotiation, in itself, may be regarded as a breach of the contract. This indicates that Hyundai may be facing extraordinary difficulties, being forced, as it were, to ask for a renegotiation from a partner widely known as a most difficult negotiator.
Hyundai estimates that it has to draw at least 500,000 tourists a year to keep the enterprise going, but thus far, in two years, it has succeeded in attracting only 340,000, which is a far cry from the target number. The admission fee collected from all tourists, which amounts to $200 a person, makes the tour too expensive to be widely popular. Aside from leasing ships, Hyundai has been pouring money into the construction of various facilities, including the Jangjeon harbor, hotels and other tourist facilities. Reports say the company has sustained a loss of more than $200 million over the last two years.
With the gloomy business prospect, combined with more than $600 million needed to pay its partner, it would not be surprising if Hyundai gives the business up altogether.
The Mt. Kumgang tour venture, however, is not merely a business. Hyundai''s herding of 1,001 head of cattle through Panmunjom was the first concrete example of South Korea''s engagement policy with the North, with the tour business providing a channel for North-South exchanges which have been much more effective than anything devised by the government so far. The tour business has been a boon to people on both sides, helping improve relations as well as being a natural instrument for economic cooperation.
This is why we believe everything should be done to find a way to keep the tour business alive. Most importantly, the government should help boost the business. Our advice is for it to remove as many regulations as possible and to grant the business whatever leeway it requires, so long as these do not threaten basic business principles.
Equally crucial is North Korea''s attitude. It has already granted Hyundai some significant privileges, including those at the Kaesong Industrial Compound, with no legal obligation for renegotiation. But the North Koreans should bear in mind that the survival of the tour business is essential for the continued flow of North-South exchanges. North Korea should also realize that Hyundai''s difficulties may have an adverse impact on future economic cooperation between the North and the South.
Hyundai''s financial straits have, of course, not been directly caused by the tour business. But the failure of this venture by Hyundai, which has been most enthusiastic about doing business with the North, will certainly discourage other companies from following suit. We hope for a flexible and generous response from the North.