Three months have passed since the Mt. Geumgang tour program was suspended, following the shooting death of a South Korean tourist at the North’s mountain resort last July. As a precondition for the resumption of the inter-Korean tour business, South Korea has demanded that the two Koreas make on-site investigations into the incident and hold authorities-level dialogue to devise measures against a recurrence of such an incident. On the other hand, North Korea insists that the South apologize first before formulating any preventative measures. As a result, the already deadlocked inter-Korean relations have been worsening. It’s been 20 years since bilateral economic cooperation began, and it is now standing at a crossroad. Here’s Dr. Kim Young-yun from the Korea Institute for National Unification to explain.

Inter-Korean economic cooperation now stands at a crucial crossroad between developing further and rattling to a halt. As you know, the Seoul government has made tremendous efforts to elicit a change from North Korea through economic exchanges. Despite brisk bilateral exchanges in economic areas, however, the two sides have made little progress in security issues, with North Korea still suffering from economic difficulty. Also, South Korea has often been swayed by the North in the course of conducting joint projects. The criticism has raised the need for carrying out cross-border economic cooperation in a different way.

Dr. Kim explains that the hard-earned momentum of economic cooperation between the two Koreas may be kept alive or lost, depending on future inter-Korean ties. Cross-border trade has grown considerably in volume, but it has been vulnerable to ever-changing political circumstances. Non-commercial trade between the two sides posted 39 million dollars from January to July this year, a 33-percent decrease from the 59 million dollars posted during the same period last year. Most of all, the suspension of the Mt. Geumgang tour program has inflicted losses on the regional economies of adjacent areas, such as Sokcho and Goseong in Gangwon province. From 1998 to 2007, the Geumgang tour business enabled travel agencies and lodging and transportation businesses to earn more than 200 million dollars in profits and created at least 2,000 jobs. But it’s hard to expect them to generate such economic benefits down the road.

It is Hyundai Asan that will be hit hardest by the failure of the tour business. The tour operator has already suffered heavy losses because it hasn’t been able to make a profit in recent months. As far as I know, there are 70-80 private companies that have invested in the tour program. They have also incurred tens of millions of dollars in losses. If this situation continues, North Korea’s economic dependence on the South will be reduced, and it will influence inter-Korean relations negatively. Seoul may then lose ‘leverage’ in its dealings with Pyongyang.

The impasse in inter-Korean ties is showing signs of being further drawn out, influencing the Gaeseong industrial park project significantly. The inter-Korean joint venture business combines South Korea’s capital and technology with the North’s labor and land. The mutually beneficial economic project has contributed to turning the venue of tension and confrontation into an inter-Korean zone of peace and reconciliation. Unfortunately, most South Korean companies that have already entered the industrial complex or those planning to do business there are now in a difficult position, due to the inadequate provision of North Korean labor. And the setback will entail many problems, like the erosion of productivity and competitiveness of South Korean small-and mid-sized firms.

The sale of a 3.3-million square meter compound as the first phase of the Gaeseong project was completed in April of 2007. Companies that leased the complex are supposed to build factories and enter there within two years. However, they are hesitating to do so because there is still some uncertainty as to whether North Korea will supply enough labor. There aren’t enough workers in Gaeseong, so it’s necessary to mobilize more laborers from outside. Transportation should be provided for the commuters, and accommodation facilities are also needed for those living in remote areas. Last December, South and North Korea agreed to build a residence hall, but the plan has made no progress since the inauguration of the conservative government in South Korea. Many companies doubt whether the Gaeseong project will move forward with the second-phase of development.

Companies interested in the Gaeseong project say it’s most urgent to work out three difficult issues—cross-border passage, customs clearance and communications. The solution of these three problems will determine the future of the Gaeseong industrial park business. Entry procedures must be simplified so that South Korean officials can easily visit the site and manage the production process. South Korean engineers should also be allowed to be stationed in the North, and the two sides should be able to exchange information about production figures more quickly. Amid the prolonged stalemate in inter-Korean relations, however, all those problems remain unsettled, since it is rather difficult to resolve them without the resumption of authorities-level dialogue between the two sides. So will these problems have an adverse effect only in South Korea?

The current setback will distress North Korea as well. For now, the country can’t collect tourism fees from the Mt. Geumgang project and local residents involved in the tour program and the Gaeseong industrial park business, including workers and restaurant owners, have lost a useful source of income. At the Gaeseong Park, 37-thosuand laborers can’t receive their wages, which amount to nearly 2 million dollars a month. If the inter-Korean ties continue to worsen, their income will be increasingly unstable.

After North Korea’s nuclear test in October of 2006, Wall Street experts said that Korean unification from the collapse of the North Korean regime would deal a more serious blow to the South Korean economy than Pyongyang’s nuclear test. The dissolution of the communist regime will undoubtedly pose a significant economic burden on South Korea. In this sense, a decline in inter-Korean exchanges isn’t a simple problem. The prolonged slump in bilateral economic cooperation could lead to a huge loss on a national level, so the authorities of the two Koreas need to be more committed to restarting their stalled dialogue. 　 [Interview] S. Korean Businessman Opens Chicken Franchise in N. Korea
Choi Won-ho, president of ‘Matdaero Chicken,’ opened a fried chicken franchise in downtown Pyongyang in June this year. Choi is now very busy taking orders over the phone and serving customers who swarm to his restaurant in Gangseo-gu, western Seoul. The restaurant is always filled with customers hoping to enjoy delicious chicken and good service. ‘Matdaero Chicken’ was launched in 1998, and now there are six branches here in South Korea. Choi began to expand the business into North Korea this year, opening the first inter-Korean joint chicken eatery in the communist country.

I opened a chicken restaurant on the main street of Pyongyang, and business is going well now. I was thinking of using the original brand, ‘Matdaero,’ but the restaurant eventually displayed a North Korean sign, ‘Nakwon Chicken.’ Nakwon means ‘paradise’ in Korean. It took two and a half years to open the restaurant.

Established and operated jointly by the two Koreas, the chicken restaurant is situated on the busiest street of the North Korean capital city. The restaurant staff delivers chicken and draft beer to homes by motorcycle. It is a very common scene in South Korea, but to North Koreans, it is something of a novelty. The menu is extremely popular with local customers, and sales are going up. As a businessman, Choi is very happy these days. But he feels much happier at the thought of contributing to Korea’s unification process.

I’ve been working in the chicken business for 16 years, and I passed on my knowhow to North Koreans. The menu and the flavor of the chicken served at the Pyongyang restaurant are exactly the same as those offered in the South. Children and adults in both Koreas will share the same cuisine, and I hope the small dish will help them open up to each other. And I feel like unification is drawing nearer.

At first, Choi engaged in ordinary chicken businesses, such as chicken processing and distribution. But he came up with the idea of opening a chicken restaurant in North Korea two years ago, when he was pondering over the idea of importing North Korean chicken. He managed to meet with North Korean officials in November of 2005 and pushed ahead with the plan afterwards. But from the beginning, he was met with strong objection from many people around him.

South Koreans were more negative and biased toward the idea than North Korean people. They never believed in my plan and they didn’t help me at all, which was quite frustrating. Some even thought I was crazy. They wondered who on earth would buy chicken in North Korea and whom I would work for. They were completely pessimistic. It was like creating something out of nothing, which was a very challenging job. The most difficult part was securing funds. It was really hard for a minor chicken businessman like me to carry out such a project without any support. Nobody helped me, and I had to spend my own money. The government didn’t give me a single penny.

Putting behind all the worries and objections, Choi became confident that he would be able to unify the two Koreas through food. He is excited and ready to open the second such restaurant in North Korea next year.

The first franchise was set up on the main street of Pyongyang in front of the ‘Triumphal Arch,’ and discussions are underway to open the second one near the ‘Unification Gate’ sometime in spring next year. Food recognizes no border. North Koreans have the same tastes as South Korean people. Seoul citizens are fond of noodles in cold broth from Pyongyang, aren’t they? By the same token, our chicken dish is loved by Pyongyang citizens. Civilian exchanges greatly helped East and West Germans open their minds. I think it’s necessary to come up with measures to boost exchanges between ordinary citizens in the two Koreas.

It’s important to earn a profit, but Choi thinks it is more important to initiate the process of reunification of the North and South. Hopefully, he will be able to deliver not only food but also South Koreans’ ardent wish for unification to North Koreans across the border.