South's Hyundai group strikes deal with Pyongyang to build industrial park near Kaesong, but doubts remain over the financing of the project
SEOUL -- North Korea is to develop a special economic zone with South Korea's Hyundai group near the demilitarised zone (DMZ) dividing the peninsula. It will be its window for trade and industry with the outside world.
Hyundai officials hammered out the deal to build the giant industrial park, a project reminiscent of China's creation of its economic zones in the early 1980s, in talks last week with North Korean leader Kim Jong Il in Pyongyang.
The new zone is to be located near the historic city of Kaesong.
Hyundai executives said Mr Chung Mong Hun, who was forced to resign as chairman of Hyundai group but remains in charge of its efforts in the North, had persuaded Mr Kim to abandon his earlier demand that Hyundai build its industrial complex in Sinuiju, an industrial city on the Yalu River border with China.
Hyundai insisted on a site at or near Kaesong in order to be close to South Korean power sources and markets and to the growing port of Inchon, west of Seoul.
The Hyundai delegation, which returned to South Korea on Thursday, also won an agreement to run bus tours across the DMZ to Kaesong, the ancient capital of the Koryo kingdom just 8 km from South Korea.
The company is planning a first phase of the industrial park to be built within a year, attracting up to 200 small labour-intensive businesses for textiles, car parts and electronic goods.
Hyundai's optimistic projection over the next eight years is to attract 850 companies employing 220,000 North Koreans posting annual exports of US$20 billion (S$34.6 billion).
But analysts here raised questions about where the Hyundai group, currently facing a liquidity crisis and reeling under huge debts, would obtain financing for the billion-dollar project.
A spokesman for Hyundai Asan, the company's arm dealing with North Korean projects, said the exact terms and conditions under which the special zone would function were still being drawn up.
But she said she did not expect the Stalinist government in Pyongyang to impose any restrictions on the movement of North Koreans into the zone, which will inevitably become a hive of capitalism.
We expect the factories in the zone to eventually employ 220,000
North Koreans, so we cannot see how there can be any restrictions,
the spokesman said.
Hyundai said the location of the site close to South Korea meant it would be easy to ensure a satisfactory supply of electricity, materials and manpower to the complex.
The tourism bus tours to Kaesong are expected to be up and running before the end of the year, said Hyundai.
Mr Chung, a son of Hyundai founder Chung Ju Yung, has now obtained permission for the company's cruise ships to sail 8 km from the North Korean shoreline instead of 19 km while travelling to the scenic Mount Kumgang. --AFP