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Divergent Expectations

By Doug Struck, Washington Post, Thursday 18 May 2000; A18

SEOUL—South Korean visitors who puff up Mount Kumgang, the groundbreaking tourist project run on North Korea's eastern coast by Seoul-based Hyundai Corp., are not surprised to see Korean workers taking care of the facilities.

But these workers are not North Koreans. Or South Koreans. The 147 workers are ethnic Koreans living in China, according to Hyundai. They have been brought hundreds of miles to work because North Korea—though starved for foreign income—does not want its citizens to have contact with their southern relatives.

That prohibition, odd for a gravely poor country, illustrates the wide gap in expectations between North and South Korea as they head into a historic summit next month. Those watching the growing South Korean enthusiasm for the meeting, scheduled for June 12 to 14 in Pyongyang, warn this gap could endanger chances for its success.

South Korea is humming with summit fever, dusting off plans for increased contact between the two Koreas. Families divided for 50 years are anticipating finding long-lost relatives, and South Korean businesses are entranced by the thought of access to cheap labor and a whole new market in the North.

A poll by the South Korean newspaper Munhwa Ilbo indicated that nearly 70 percent of South Koreans expect North Korea to open its doors to the world sometime after the summit.

But a look at the limited number of inter-Korean efforts suggests North Korea is likely to be much more cautious, and the obstacles to closer contact may be much larger than the ambitious southerners expect.

North Korea wants the investment, but they don't want to open their society to get it, said Park Jong Chul, a director of the Korea Institute for National Unification, a government-supported think tank.

Businesses expecting to lead the charge to open North Korea underestimate the difficulties, said Kim Byung Kook, a professor of political science at Korea University in Seoul.

There's no reason for sound-headed, cool-minded businessmen to look at North Korea as a business site, he said. There are more attractive alternatives.

The few joint projects offer examples of the problems.

For example, at Kumho, in eastern North Korea, a South Korean utility company is using North Korean workers to build a power plant under a 1994 international agreement brokered by the United States. But the foreman of the project cannot talk to the workers—instead, he must deal with an official representative of the North Korean government, who in turn gives the workers instructions.

Hyundai, South Korea's biggest conglomerate and a leader in establishing business ties with the North, has proposed sending 500 North Korean workers to construction sites in Libya and Iran. But Pyongyang has yet to allow its workers to have contact with South Koreans, much less other foreign nationals.

Undeterred, Hyundai has proposed developing a huge industrial park to employ 220,000 North Koreans in businesses to be set up by 850 foreign and Korean firms. But Pyongyang has offered a site in the far north that is isolated from contact with population centers—and isolated from electrical power, good transportation or the South Korean firms it would hope to lure.

We think there are business opportunities in North Korea, and we think Hyundai will be the primary company doing business there, said a still-enthusiastic Kim Jung Soo, a Hyundai spokesman.

Some 135 South Korean companies now manage to do business with the North, generating a modest $330 million in trade.

But the difficulties of working with the North can take the shine off potential profits.

For example, to make the Hanmaum—One Heart—brand of cigarette, North Korean tobacco is shipped to the South, where it is blended with other tobaccos and shipped back to Pyongyang. There it is cut and rolled into cigarettes, which are then shipped back to the South. All this transportation erases the cheaper production costs: The cigarette is the most expensive South Korean brand.

Even free stuff is expensive. As a goodwill gesture for the summit, South Korea donated 200,000 tons of fertilizer to North Korea this month in time for planting season. But the fertilizer will not pass through their common border; instead, it will be loaded on a ship sailing to Nampo, North Korea's major port, where it will be laboriously unloaded by stevedores one bag at a time.

The cost of shipping the fertilizer is more than the fertilizer itself, said Park.

South Korean President Kim Dae Jung has prudently been trying to lower expectations for his meeting with North Korean leader Kim Jong Ill.

We are preparing to meet our minimum expectations, said Yoon Sock Joon, a spokesman at the Blue House presidential office. We're actually hoping for more, of course, but if it is just a historic, symbolic occasion, we will be satisfied with that.

The effort to limit hopes is not entirely successful. There is a lot of enthusiasm among private industry to look for investment in the north, said Kim Young Gyu, of the South Korean Ministry of Unification.

There is competition between the big South Korean conglomerates, and North Korea is undeveloped territory for them, said Park. Their goal is to conquer that territory for their business, and in the long run, make it an outpost to move into China and Far East Russia, said Park.

Korea University's Kim noted that there may be a flush of business created if Seoul pledges $1 billion in financial aid to help rebuild the North, and if Japan eventually pays some sort of World War II compensation settlement to Pyongyang. But Kim doesn't see that money going far in a country that needs massive reconstruction of its basic infrastructure, from railways to power plants to factories.

It may be [that] this will lead to a couple of industrial parks to give North Korea just enough to survive, Kim said.

North Korea agreed to the summit—the first meeting of the leaders of North and South Korea—because of its economic distress and international isolation. Pyongyang already is reaping diplomatic benefits: Italy and Australia have resumed diplomatic ties, and Pyongyang is talking with other countries and knocking on the doors of various regional and international forums.

But it may be more difficult for Pyongyang to win ongoing economic cooperation on its terms.

I would not expect anything spectacular to come out of it, Ahn Byung Joon, a Yonsei University professor and adviser to the South Korean Unification and Defense ministries, said of the summit. There is a fair amount of skepticism and wariness about whether North Korea is willing to strike the Big Deal.

Even progress outside of business may be limited. Ahn said he would anticipate only a symbolic number of family unifications, hardly enough to satisfy the hopes of 700,000 people still alive who fled North Korea during the war and left relatives behind.

Veteran South Korean National Assembly member Chung Jeymoon has been attending the twice-annual meetings of the Inter-Parliamentary Union, a regular gathering of the world's lawmakers, for more than nine years. For almost all of those meetings, the North and South Koreans ignored each other—in either stony silence or, occasionally, with perfunctory handshakes.

After the summit announcement in April, Chung said he thought there would be a different reaction from the North Korean delegates at the union's meeting this month in Amman, Jordan. Instead, he listened as the North Koreans delivered a typical harangue about Seoul.

North Korea may be changing gradually, Chung said, but it's not changing suddenly.