The lights are flickering out on one of the world's most ambitious and expensive tourism projects: the Mount Kumgang resort in reclusive North Korea.
The billion-dollar venture was launched three years ago by Hyundai, the South Korean conglomerate, amid hopes that it would spur reconciliation on the divided peninsula. But, today, its operator is on the verge of bankruptcy, visitor numbers have nosedived and, far from promoting harmony, the two nations are squabbling over development fees.
Embarrassing power cut
The sorry decline of the resort was emphasized recently when government ministers met at Mt Kumgang for a bilateral meeting. No sooner had they started than they were plunged into darkness by a power cut.
Newspapers in South Korea showed pictures of the grim-faced negotiators illuminated by candlelight as they failed to break a year-long impasse in talks between the two nations, which are still technically at war. The power failure was a humiliation for the cash-strapped, under-developed and starving North. It could also mark the end of Hyundai Asan, which has seen Mt Kumgang become a black hole for investment.
In 1998, Hyundai promised to pay US$900 million over seven years for rights to run the first tourist service into North Korean territory. It has since invested another US$141 million on building much of the resort's infrastructure, including a hotel, concert hall and spa -- and making extensive improvements to the dilapidated port.
To pay off this enormous investment, it anticipated attracting 500,000 visitors a year from the South, each paying about US$1,500 for the cruise across the border (there are no land routes).
These forecasts have proved to be calamitously misjudged. Even during the first two years -- when enthusiasm for the project was strong -- only 370,000 people made the journey. This year, the figure will be less than 50,000 as Hyundai Asan has been forced to cut three of the four ships on the route in response to mounting debts and falling demand.
To make matters worse for the operator, its founder Chung Ju-yung -- the richest man in South Korea, who enjoyed a close relationship with North Korea's "Dear Leader" Kim Jong-il -- has died. His sons have since been entangled in a feud over succession that has left the Hyundai conglomerate divided and Hyundai Asan bereft of partners.
The company's last hope is that North Korea will keep a promise to open a land route across the border, which would make travel to Mt Kumgang much easier, and to declare the area a special economic zone, which would encourage other developers with tax breaks. "The only way to solve our financial difficulties is by opening a land route," said Jang Whan-bin, a director of Hyundai Asan. "This is a matter of life and death. Otherwise, I think we can survive until December." But the North has been in little mood to offer concessions since June, when Hyundai said it could not afford the US$12 million-a-month development fee stipulated in the contract.
No more sunshine politics
The prospect of a breakdown is a nightmare for South Korean leader Kim Dae-jung, who staked his presidency on a "sunshine policy" of engagement with the North. In three years of stop-start moves towards reconciliation, Mt Kumgang is the only common ground to be carved out.
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