Successful Korean Summit Bodes Well
For Southern Firms Weighing Chances
By MICHAEL SCHUMAN and JANE L. LEE
Staff Reporters of THE WALL STREET JOURNAL
June 16, 2000SEOUL, South Korea -- The first summit between the top leaders of North Korea and South Korea may lead to more South Korean business in the North -- if southern companies can overcome the imposing obstacles.
The summit, which ended Thursday, could set the stage for an easing of tensions in the Cold War's most intractable standoff. North Korean leader Kim Jong Il and South Korean President Kim Dae Jung signed an accord on Wednesday in which the two agreed to work toward unification, reunite families separated between the two Koreas, hold a second summit and foster economic cooperation.
Kim Dae Jung said in a speech upon his return to Seoul that he brought up at the summit the sensitive issues of the 37,000 U.S. troops stationed in South Korea, which North Korea has demanded be removed, and Pyongyang's missile development and suspected nuclear-arms programs, which are of paramount concern in
Washington. Details of these discussions weren't provided.
The economic match seems like one made in heaven South Korean companies are eager to tap North Korea's low-cost labor and to build infrastructure, and North Korea badly needs the South's investment to resurrect its ailing economy. Some of South Korea's biggest companies, including Hyundai Group and Samsung Group, have investment plans for the North.
Economic Convergence
"If we enter North Korea, lay down railways, connect electricity, build roads, ports, telecommunication links and industrial parks, then what was once South Korea's economy will become the economy of the Korean peninsula," Kim Dae Jung said in his return speech.
However, the hurdles are high. Top South Korean executives in Kim Dae Jung's delegation proposed that the two sides set up an economic committee to discuss the arrangement of legal accords on investment guarantees, double-taxation avoidance, payment settlements and intellectual-property rights that would govern South Korean investment in North Korea. Without them, the businessmen stressed to the North Koreans during a meeting "We cannot realistically expect any sustained economic cooperation." North Korea, however, hasn't yet agreed to form the committee.
Business is tough for Southern firms already operating up North. The two Koreas don't have direct phone or mail links, and there are no land routes across the armed border. Other problems include poor infrastructure in North Korea and the unpredictability of northern officials.
Bridging the Gap
Consider Daewoo Corp.'s textile business. Daewoo Corp., the trading firm of the ailing Daewoo Group, formed a 50-50 joint venture called National Industry Co. with a North Korean organization in 1996, after five years of negotiations. Daewoo invested $5 million in a factory in the North Korean city of Nampo to make jackets, shirts and bags.
The venture had problems from the start, says Chang Kyung Wook, executive director of Daewoo Corp.'s textile division. Daewoo had to bring in everything the factory needed -- including sewing needles -- from South Korea. Frequent electricity shortages forced Daewoo to bring a generator from the South for the factory.
When it broke down, Daewoo had to ship it back by sea for repairs, sometimes causing the factory to shut for months. In February 1999, North Korea banned Daewoo executives from visiting the plant and deported all of Daewoo's staff in North Korea, forcing Daewoo to run the factory via fax machine.
Bang Young Chol, a 31-year-old North Korean defector now living in South Korea, says he is well-placed to help with such problems. He and another defector opened a new firm this week called Pyongyang Consulting, and he says his phone hasn't stopped ringing.
When in North Korea, he says, he worked in an office that imported items for Kim Jong Il. Among Kim Jong Il's favorites European cigarettes, of which he smokes three packs a day; cognac; and videos of Star Wars, Jurassic Park and other U.S. science-fiction movies. A 40-member team of researchers tests all of the imported food before passing it on to Kim Jong Il, he says.
A Bowl of Cognac
Mr. Bang describes Kim Jong Il as friendly to the staff. On one occasion, Kim Jong Il came to Mr. Bang's office to compliment them on their good work. He placed large bowls usually used for noodles in front of each of them, filled them with cognac and said "If you drink this, you are a man." Mr. Bang guzzled it down, got a pat on the back from a pleased Kim Jong Il, and later fell ill.
Mr. Bang says his privileged life in Pyongyang ended after he had a falling out with a superior at work, and in 1997, he fled to Seoul via Japan. Since then, he has studied computer science in Seoul and worked in the research department of an electronics company.
The big mistake that Southern firms have made in approaching the North, he says, is that they "thought everything was socialist." Mr. Bang argues that private business activity is flourishing among the lower rungs in North Korean society, and that these activities have only strengthened as the state-led economy has withered. Surprisingly, the best opportunities for South Korean companies, he says, are in technology. He believes that highly trained North Korean workers could be cheap programmers and engineers for South Korea's technology companies.
Kwon Oh Yong, executive director at KTB Network Corp., one of South Korea's largest venture-capital firms, contacted Mr. Bang for advice on helping the small companies in which he has invested start software businesses in the North. "We believe we can contribute to the development of the North Korean economy," he says.
A History of Missteps
Key events in inter-Korean relations
Aug. 15, 1945 Korean Peninsula split into Communist North Korea and U.S.-backed South Korea following end of Japanese colonial rule.
June 25, 1950 North Korea invades South Korea, launching the Korean War.
July 27, 1953 An armistice ends the fighting, but a state of war persists.
July 4, 1972 Two Koreas issue a joint communique, agreeing to achieve peaceful reunification of their peninsula.
Sept. 4, 1990 Prime ministers of two Koreas hold talks for the first time.
June 1994 Former President Jimmy Carter visits North Korea and its leader, Kim Il Sung, proposes a summit with South Korean President Kim Young Sam.
July 8, 1994 Kim Il Sung, who had ruled North Korea for 46 years, dies of a heart attack just before the summit, which is canceled.
April 1996 Washington and Seoul propose four-party Korean talks with Pyongyang and Beijing.
Feb. 25, 1998 South Korean President Kim Dae Jung proposes an inter-Korean summit in his inauguration speech. North Korea does not respond.
April 18, 1999 First high-level meeting in four years between the two Koreas collapses in Beijing after North Korea refuses to discuss the reunion of separated families.
June 1999 Two Koreas hold vice-ministerial talks in Beijing to discuss fertilizer aid to North Korea. Talks collapse, partly because of a naval clash a week earlier in the Yellow Sea.
March 17, 2000 Two Koreas start secret talks in China on an inter-Korean summit.
June 14, 2000 Kim Dae Jung and North Korean leader Kim Jong Il complete their unprecedented inter-Korean summit in Pyongyang.
Return to our
Page Back to Korea
