Hyundai's North Korean nightmare

Hyundai has invested millions upon millions of dollars in North Korea with almost nothing to show for it, according to the International Herald Tribune:

For weeks, North Korea and Hyundai Asan, Hyundai Group's North Korean business arm, have been at odds over the dismissal of Kim Yoon Kyu, a Hyundai executive accused in August of embezzling money.

North Korea has demanded that Kim be reinstated. It argued that, whatever Hyundai had discovered about him, Kim should be Hyundai's point man in North Korea because he has had the extremely rare privilege of meeting the North Korean leader, Kim Jong Il, on several occasions. Hyundai has held its ground, calling the dismissal an internal company matter.

Last week, North Korea accused Hyundai of "deception and hypocrisy" and said it was reconsidering all its business deals with Hyundai. It also blocked the visits to North Korea of Hyundai officials who wanted to discuss new projects, but it did not mention returning any of the $500 million it had received from Hyundai for business rights.

It is unclear how the dispute will be resolved. On Tuesday, the company said North Korea had agreed to talks on the issue, but gave no details.

Some analysts doubt North Korea's willingness to resolve the issue. "North Korea appears to have determined that it has sucked as much as it can from Hyundai," said Kim Kyu Chol, head of the Forum for Inter-Korea Relations, a Seoul-based group that monitors business relations between the countries.
[...]
There are a few success stories, like Elcanto of South Korea, which runs a successful shoe factory in Pyongyang. But a seldom discussed outcome of Seoul's "sunshine" policy of engaging North Korea is the fate of an estimated 1,000 South Korean businesses and investors who have gone bankrupt or incurred losses because of their dealings with North Korea, according to the Forum for Inter-Korea Relations.

Most were minor players who had been attracted by North Korea's cheap labor and the absence of tariffs, or were driven by a desire to implant capitalism in the isolated state. But in North Korea, they found a country where transportation and utilities are inadequate, deliveries seldom arrive on time and commercial decisions are influenced by political factors. They could not communicate directly with their headquarters in South Korea and did not have freedom to visit the North. Their North Korean partners were often replaced virtually overnight.

"It's very hard to find a success story," said Lim Wan Kyun, head of the Inter-Korea Economic Association, who poured millions of dollars into building factories in Pyongyang before the authorities there blocked his entry into the country last year, citing political tensions with South Korea. "You are a fool if you enter North Korea to make money."

(via Mick Hartley)

Posted by damian at October 26, 2005 07:40 AM | TrackBack