Samsung Group, South Korea's largest group, and other Korean companies that welcomed warming relations with the North as a business opportunity only a year ago have cooled their exuberance as North-South talks falter and terrorist suspicions revive.
"Slow progress in improving relations with North Korea has stalled our business plans," said Choi Seung Jin, Samsung group spokesman. "For business groups, there should be a clear picture of profitability." Samsung announced last year that it will invest US$500 million in the next 10 years in North Korea, where it's been making television sets, phones and clothing since 1992.
President Kim Dae-jung's landmark summit with North Korean leader Kim Jong-il in June 2000, which won the South Korean president the Nobel Peace Prize, hasn't delivered the prize of profits for South Korean companies itching to capitalize on cheaper labor in the North. Biggest victim to date: Hyundai Group, which is trying to pull out of a tourism project with the North that has yet to make a profit after three years.
Samsung officials say they can't proceed with more investment until stalled talks between the North and South resume. Hinged on those talks are related negotiations the companies say are crucial to their expansion in the North -- negotiations on improving roads, power and other installations.
North-South talks collapsed earlier this month, amid North Korean umbrage about the security alert imposed by the South after the Sept. 11 terrorist attacks in the US.
John Bolton, US undersecretary of state for arms control and international security, this month named Iraq and North Korea as the two countries actively conducting germ-weapon tests, the International Herald Tribune reported today. North Korea has further aroused suspicion by signing a secret accord to sell medium-range missiles to Egypt, triggering security concerns in Israel, AFP reported.
Amid all the revived international suspicions about North Korea as a state that condones terrorism, business can't flourish, Korean companies say.
LG International Corp, the trading arm of Korea's second-largest industrial group, has put on hold its plans to build a bicycle plant and scallop farm in the North.
"In order for us to start business, we need roads and other infrastructure, but North Korea hasn't replied back to us," said Lee Sang Ho, spokesman at LG International. "We're not inclined to build roads with our own money."
Hyundai Merchant Marine Co pulled out of the Mount Kumgang tourism project in the North in June, after losing about 160 billion won (US$125 million) on cruises to the seaside resort.
Affiliate Asan Corp, which is now in full control of the venture, said it has lost 220 billion won and rankled the North when it fell behind in payments on the US$942 million Hyundai agreed to pay to develop Kumgang.
The government, trying to save face on the much-hyped project, arranged a US$69 million bailout loan to keep the boats operating. Asan says it will jump ship on the project if both governments don't agree by Dec. 15 to allow it to set up casinos and duty-free shops on the vessels.
Kim has been trying to get Kim Jong-il to match his visit to Pyongyang and come to South Korea this year. The North has balked.
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