Private inter-Korean biz projects hit snag

North Korean economic cooperation projects on the private level are shaking due to the lack of a legal framework and management capability of the government.

Since the birth of the current South Korean government, it has made it a principle to separate politics from business. The government pronounced that it would approve North Korean business projects, but it wouldn't be involved in them. The government judges feasibility and potential of business projects and it doesn't care about their profitability.

As a result, corporations that have made investment in North Korea are suffering from massive losses, and their will to invest in the North has been weakened substantially. Following the June 15 declaration, only three business projects were approved by the government despite activated exchange and cooperation between South and North Korean authorities.

For this reason, private firms are complaining about the mechanical separation of politics from business in the government's North Korea policy. An expert on North Korean affairs pointed out that the government intentionally exaggerated North Korea's market value and neglects providing accurate guidelines.

Dong Yong-Seung, head of Samsung Economic Research Institute's North Korean research team, said that North Korea's market value or investment value is near zero. He noted there should be a consulting group between the government and private firms for consultation and review of North Korean projects beforehand.

Also, legal and administrative safety nets such as an investment guarantee agreement and agreement for avoidance of double taxation do not exist. At the working-level meeting for South and North Korean economic cooperation Sept. 25, there was no conclusion on these matters.

The South¡¯s Unification Ministry officials said that the determination of profitability of business project has to be made by the investor, noting that it is not proper for the government to compensate for losses in North Korean projects by private firms.

Ha Tae-Won scooop@donga.com