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[EDITORIALS]Forced Investments Are Wrong

Published: 05 Jan. 2003, 14:32

The news that the government is trying to coax Hyundai Motor Company into taking over Hyundai Engineering and Construction's North Korea business is shocking. The Mount Kumgang tourism business did not decisively cause the Hyundai Group's breakdown, but if the government forced Hyundai Motor to take over the business when Hyundai Construction is in actuality going to pieces, we cannot help but deplore the level of the government's intervention in private business. When the intervention became a troublesome issue, the government said it never "officially"advised or requested Hyundai Motor to do anything; its suggestions were "unofficial." But how coercive must such an unofficial suggestion have been to prompt Hyundai Motor to say, "We will stake our company's fate on opposing it."

The government's position is understandable. President Kim Dae-jung boasted at about this time last year that there would be "a boom in business in the North exceeding that of the Middle East." A year has since gone by and the Mount Kumgang tourism business, the epitome of inter-Korean reconciliation and cooperation, is on the verge of being closed, and inter-Korean relations are at a stalemate. The government wanted Hyundai Motor to help break this deadlock and make relations improve again.

But it is up to the company to choose, not the government to force.

Investment in the North must be undertaken according to market mechanisms for it to benefit both the North and the South. If companies invest in the North, where profitability is still questionable, at a time when many of them are struggling to stay alive, we will have more corporate failures littering the Mount Kumgang landscape.

For the business to be successful and to be a model of cooperation, Seoul must convince the North to base it on market principles and values. The government should first negotiate with the North to adjust the onerous license fee. The North should also discard the many regulations and absurd conditions that have constrained private South Korean investment there.