Mount Kumgang investors vexed by uncertainty

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Mount Kumgang investors vexed by uncertainty

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South Korean businessmen who invested their own money in the Mount Kumgang resort are anxious about the long-time suspension of the tourism program since the death of South Korean tourist Park Wang-ja, who was shot by a North Korean soldier in July 2008. They recently asked North Korea to authorize a visit to the resort in order to check on their facilities and other assets. By Park Sang-moon

A group of officials from South Korean developer Hyundai Asan, the North Korean business arm of Hyundai Group, crossed the border with the North on Friday to attend the ninth annual memorial service for late Chairman Chung Mong-hun, who dedicated his life to promoting inter-Korean tourism and business endeavors.

The service was held at the Mount Kumgang resort, once a symbol of reconciliation and now a reminder of increased tensions on the peninsula. After a North Korean solider shot and killed a South Korean tourist at a nearby beach that the North claimed was a military zone, the joint tourism program was suspended and its assets later seized.

Chung’s widow and current Hyundai Group Chairwoman Hyun Jeong-eun, who did not join the delegation and instead visited Chung’s tomb in Gyeonggi, raised hopes for the resumption of the tour program, saying she is “optimistic” about the possibility.

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A photo of facilities at the Mount Kumgang resort taken in April 2010[JoongAng Ilbo]

And it is not only Hyun awaiting the resumption of the tour. Forty-two South Korean businessmen who used to run small shops, restaurants and other businesses at the resort are pushing for the resumption in order to salvage their investments.

“I have lost all of the money invested in the resort,” said Lee Jong-heung, a 55-year-old businessman who ran a bar and restaurant at Mount Kumgang. He is the former executive director of Samsung Group and one of Korea’s most successful entrepreneurs. After retiring from the tech giant, he started a new business at the Mount Kumgang resort.

“No one knows when the resort will be open again,” he said.

The group of businessmen sent the North Korean regime an application to visit the resort in mid-August. They previously sent the same request in early July, but the North has not replied.

“We want to see whether or not our facilities and businesses that remain in the resort are still in good condition,” Lee said. “Although we’re not sure whether Pyongyang will approve our visit, we still have a faint hope that they will.

“It’s been four years since the shooting incident, and the resort hasn’t opened since. I’m just helplessly sitting here in the South and waiting for the resumption of the suspended tour program.”



A risky investment

On July 11, 2008, the death of the South Korean tourist Park Wang-ja changed the course of inter-Korean relations and led to significant financial losses for both sides.

One day after the shooting, the South Korean government announced that it would suspend all tour programs at the resort and forbade South Koreans from traveling there.

The North said it would kick out “unnecessary” South Koreans and begin with the “disposal” of South Korean assets, which totaled $443 million.

In the 2.33-million-square-meter (5,757-acre) resort, Lee, the former executive director of Samsung, invested a total of 3.8 billion won ($3.3 million) in five shops, a beer factory and a restaurant.

“All of sudden, the South Korean businessmen were forced to leave all of their properties behind,” he said. “The government just consoled us that the resort business would be restarted sometime in the future and asked us to just wait. But that day has never come.”

Now struggling with a massive amount of debt as a result of the suspended tourism program, Lee is making a living as a door-to-door cosmetics salesman.

“Most of the South Korean investors took out loans from banks by themselves, without any government subsidiaries, to start their businesses in the North,” Lee said. “But now we can’t even make a living.”

Lee isn’t the only one struggling to recoup losses.

“The total amount of losses of the 42 South Korean businessmen reaches up to 133 billion won, apart from that of Hyundai Asan,” said Choi Yo-sik, chairman of the association of South Korean businessmen attempting to re-enter the North. “Most of us have lived without any regular jobs for the past four years, just making a living as manual laborers or part-time employees.”

One of the businessmen’s biggest concerns is the condition of their facilities that they left behind.

“When the government made the sudden announcement to close the resort, my beer factory had 14 tanks filled with alcohol,” Lee said. “They must be rusty now without being cleaned or managed by anyone.”

Another businessman, An Gyo-sik, a 40-year-old owner of a hotel at a nearby beach, said he is concerned about the condition of his venture.

“My hotel is located near a beach, so it needs to be cleaned regularly from the salty wind,” An said. “But for the past four years, it has been abandoned without any care. I was told that there’s mold all over the beds.”

In 2009 and 2010, the Ministry of Unification paid compensation for the South Korean businessmen ? 11.8 billion won in total as a loan with annual interest of two percent ? taking their houses or other real estate as collateral. But that money is not enough, the association said.

“I invested about 14 billion won in the hotel,” An said. “The government didn’t know the exact amount of our losses, and it still has no idea when they will resume business.”

Hyundai Asan, which led the entire tourist program and paved the roads and built the resort, also suffered substantial financial losses.

“We invested about 226 billion won on building facilities and paid $480 million to purchase the exclusive right of developing the resort,” said Roh Jee-hwan, a manager at the public affairs department of Hyundai Asan. “The total amount of losses in sales for the past four years is estimated to be about 522.1 billion won as of last year.”

Roh said the suspension of the resort resulted in losses on both sides of the border.

“It must be a loss to the North Korean regime because we used to pay about $1 million per month of our profits to them,” he said. “A high-ranking North Korean official told us that they are attracting foreign tourists because there’s no sign of improvement in frosty inter-Korean relations.”



Future outlook

Opened in 1998 as a rare example of inter-Korean cooperation, the scenic resort once attracted about 350,000 tourists annually in its heyday, according to Hyundai Asan. The number has since dropped dramatically to below 10,000 per year.

Before it allows tours to resume, South Korea demanded a thorough on-site investigation and an explanation from the North of what exactly happened when Park was shot in a nearby area. But the North has refused.

Angered by the lack of remorse, the South maintains its ban on the cross-border tours, and the North has seized the properties owned by South Korea.

Since then, the regime has run the tourism program on its own, targeting Chinese tourists and other foreign investors. Sources say that they have occupied some vacant buildings and facilities.

In order to resolve the frozen tourist program, Hyundai Group Chairwoman Hyun Jeong-eun made her visit to the North in 2009 and held bilateral talks with then-leader Kim Jong-il. There, both sides reached an agreement on five issues, including thawing the frozen tourism at the resort. At the time, Kim Jong-il reportedly promised that he “would never let the same things happen again.”

However, a string of military provocations occurred afterward, including the sinking of the warship Cheonan, which was confirmed to be torpedoed by the North after an international investigation carried out by a team of experts from the South, the United States, the United Kingdom, Canada and Australia.

The shelling of the Yeonpyeong Island later that year increased tensions on the peninsula. That military act led to the freeze of all inter-Korean relations.

“Although the late leader Kim Jong-il reportedly promised to prevent similar incidents, it wasn’t an official announcement for the South Korean government,” Park Soo-jin, a Unification Ministry spokeswoman, told the Korea JoongAng Daily. “If Pyongyang makes that promise to our government and arranges legal measures to guarantee the safety of South Korean tourists, we can restart the tours anytime.”

Still, many businessmen remain pessimistic about the prospects of restarting their businesses at the resort.

“Even if the resort is to open again, we would probably be unable to restart our businesses,” An said. “The facilities would need to be refurbished, which would cost a lot of money. But we won’t be able to afford it.”

Lee Hye-ok, a Unification Ministry official who was in charge of the Kumgang resort tours, said that they feel sorry for the businessmen, but they didn’t expect the suspension would last long.

“We still feel sorry for the investors,” Lee said. “If the tours restart, we could possibly consider giving government subsidies for them to restart their businesses.”

By Kim Hee-jin [heejin@joongang.co.kr]

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