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More Unconditional Economic Aid to N.Korea Worries Some

Posted September. 29, 2007 03:43,   


There are many concerns regarding the inter-Korean summit to be held early next month. Business leaders are feeling particular strain regarding the plethora of ideas from the incumbent administration and former president Kim Dae-jung about how to carry out economic cooperation with the North.

If the current administration promises the North too much aid without taking into consideration economic factors, this will likely have serious consequences for the next administration as well as companies. Issues debated within the administration include establishing a second Gaesong Industrial Complex in Haeju or Nampo, helping to build infrastructure such as roads, ports and telecommunications lines, providing energy resources including electricity, planting trees, and helping to launch Saemaeul Movement or the new community movement, which are all costly projects.

A business leader said, “If the government loses its cool and provides aid to the North recklessly, the cost will be borne by Korean companies and people.”

Such concern is justified as the Hyundai Group, which engaged in unprofitable business activities with North Korea under the guidance of the Kim Dae-jung administration in the past, came close to bankruptcy.

Some argue that expanding economic aid with the help of Korean companies can undermine company image and performance. Foreign investors may send negative signals to these companies since the aid could be delivered even as DPRK-U.S. relations remain estranged.

Others claim that increased economic cooperation with the North could provoke U.S. consumers, undermining the sale of Korean products in one of the biggest markets of Korean goods and services. The IT industry is most sensitive about being undercut in the international market due to increased economic cooperation with the North.

Park Yeong-wha, the advisor of the South-North Economic Cooperation Committee at the Korea Chamber of Commerce and Industry, said at a forum organized by the Northeast Asia Peace Committee of the Uri Party in August, “Because North Korea is under the Wassenar Agreement (which contains sanctions against terrorist-assisting countries), there are limitations to goods bound for North Korea and no preferential tariffs applied to exports to the North.

Many business leaders emphasized that the incumbent administration should approach economic cooperation with the North from a long-term perspective, instead of trying to make visible achievements before its term ends. In particular, pushing companies to engage in unprofitable projects should be avoided by all means.

They add that the North Korea’s nuclear issues should be resolved before helping the North to build social infrastructure. Then they should talk in detail about issues related to guarantees of investment safety. And only after that they can in earnest discuss the expansion of economic cooperation.

One official of Samsung Electronics, who was involved in the economic cooperation project in the mid 1990’s, said, “In return for building electronic appliances plants in N. Korea, we asked the North to provide land for logistical centers, along with stable electricity and water, but the requests were never met. Under such circumstances, there is nothing you can do to realize economic cooperation.”