How to Do Business With the NorthIt has been reported that, as of the end of the second quarter of this year, Hyundai Asan''s has gone into the red to the tune of $206.37 million (approximately 227 billion won). The company says that this is due to its very big initial investment in facilities and to poor response to its marketing program. Of course, we can''t jump to conclusions about the ultimate gains and losses of economic cooperation with the North on the basis of such a short-term balance sheet. When we take into consideration for reunification by broadening the range of our exchanges with North Korea and relieving tension on the peninsula, it is well worth the effort to persevere in spite of some losses early on.
The real problem lies in our providing more assistance to the North than we can really afford under our present circumstances. If corporations just jump on the northbound business bandwagon, ignoring economic principles and their own limitations, they are in for some disappointment. Nor is government arm-twisting to get more businesses involved likely to lead to good results. The recent stir over who ordered 45 billion won''s worth of long underwear and what is to become of it and its unrecompensed makers is a perfect example of the sort of improvisational style and murky dealings that characterize our programs of economic exchange with the North. A number of companies that took a chance on projects with the North have already gone under. If the corporations carrying out such projects can''t survive, what good is that to North Korea, much less to our own economy? In an economy where the fate of dozens of bankrupt firms, large and small, is in the hands of the courts, it is absolutely essential that we approach North-oriented business relations with the greatest of care, keeping in mind the long-term health of our own economy.
On Wednesday, the government held a meeting, presided over by the minister of finance and economy, to promote North-South economic cooperation. The main topic of discussion was the Kaesong, in particular, whether to go ahead with the original plan to have Hyundai and the Korea Land Corporation build the estate or to seek out a different large corporation to replace Hyundai. It was only nine days ago that the president of Koland confirmed to the National Assembly the corporation''s intent to proceed, saying: "We will begin earthwork on the one-million-pyong site for the industrial estate in Kaesong early next year. I''ve reported this to President Kim." In the meantime, Hyundai''s situation has worsened considerably, causing the government to reconsider who should carry out the Kaesong project. This makes the public feel quite doubtful about our ability to conduct business with the North successfully.
Above all else, the government needs to systematize every aspect of business with the North and make all dealings transparent. During the second working-level talks on Nov. 8, investment guarantees, prevention of double taxation and procedures for settling accounts must be negotiated. All business dealings must be open and predictable, and there has to be at least some minimum amount of profitability in each project as well as some safety nets built in. If these projects turn out to be nothing but big giveaways, they will be a loss to both sides. Most important is what sort of conditions and business environment North Korea will provide. If they are good enough, businesses will flock to the North without any urging from the government.
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