When North Korean leader Kim Jong-un said properties at the Kumgangsan resort built by South Korean companies are “shabby” and ordered to get rid of them on Oct. 23, he dashed cold water on hopes that inter-Korean economic cooperation would resume soon.
The Kumgangsan mountain resort is a symbol of the South-North dialogue, along with a joint industrial park at Kaesong. It is also the result of huge investments by South Korean companies that have seen piling losses since the operation stopped in 2008.
North Korean leader Kim Jong-un (center) inspects the Kumgangsan resort in this photo provided by the North’s Korean Central News Agency on Oct. 23. Kim ordered the removal of all South Korea-built facilities at the once jointly run tourist spot, according to the KCNA. (Yonhap)
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Hyundai Asan, an arm of conglomerate Hyundai Group, poured 800 billion won ($683 million) into the resort at Kumgangsan. The resort business created an average of 300 billion won in revenue for Hyundai Asan, which holds a 50-year license for operation of the resort, until it was closed. North Korea earned $500 million from entrance fees between 1998 and 2008.
But it shut down, and the company has now accumulated 1.6 trillion won in losses, and 220 billion won in operating losses.
“The news was surprising because it came as we’re preparing for the reopening of the resort,” said a Hyundai Asan official. “But we’ll handle matters calmly and we are committed to South-North economic cooperation.”
Another company hit by Kim’s remarks is South Korean resort developer Ananti Group. In 2008, leasing from Hyundai Asan, the developer opened a resort including a golf course and hot spring at Kumgangsan, for which it had invested 91.3 billion won. But the resort has been shut down since a South Korean woman was shot and killed by a North Korean soldier only two months after its launch.
Ananti Mount Kumgang
A series of dialogue among the two Koreas and the US last year lifted expectations that inter-Korean business cooperation could recuperate soon. The North Korean leaders on Jan. 1 said in a speech that they would resume operations in the two areas without any preconditions.
Hyundai Asan announced in March it would inject 34 billion won for renovation and restoration in preparation for the reopening.
Ananti in December 2018 appointed Jim Rogers, chairman of Rogers Holdings and co-founder of Quantum Fund, as an outside director for a three-year term.
“This means that North Korea intends to go about independently with regards to tourism policy,” said Bong Young-shik, a Researcher at Yonsei Institute for North Korean Studies.
But other experts say Kim’s comments is not an ultimatum and rather his attempt to save face while boosting North Korea’s stake in the tourism business at Kumgangsan.
Jeong Se-hyun, executive vice chair of the National Unification Advisory Council, Presidential Advisory Council on Peaceful Unification Policy, called it “a plea disguised as a threat.” North Korea receives fees while South Korea holds management rights, and the North might want to change that.
“North Korea might want to raise its stake as at least an equal business partner,” said Jeong in a radio interview on Oct. 24.
The company estimates 1 billion won for depreciation of the properties in North Korea each year, but the losses incurred would be hard to estimate, an Ananti official said.
“But we want to make Ananti Kumgang a world class report and we will cooperate with any attempt to redevelop the report,” he added.
By Park Ga-young (firstname.lastname@example.org)