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Hyundai Group Chief Heads to N. Korea

Posted August. 11, 2009 08:25,   


Hyundai Group Chairwoman Hyun Jung-eun headed for North Korea yesterday amid expectations that she could provide a breakthrough in the conglomerate’s troubled business in the North.

She is expected to discuss the release of a Hyundai Asan employee detained in the North, operations at the Kaesong industrial complex, and resumption of tours to Mount Kumgang and Kaesong. Speculation is rising that her top priority is getting the employee freed.

“I will make an effort for his release,” she told reporters before leaving for Pyongyang. On the resumption of the tours, however, she simply said, “I won’t be sure until I get there.”

○ Normalizing the industrial complex

The employee entered his 134th day of detention in the North yesterday. If a meeting between Hyun and North Korean leader Kim Jong Il or another high-ranking North Korean official takes place, the chances of his release are high.

Speculation is rising that the North could surprise Hyun with an unexpected gift in the same way Pyongyang released two American reporters for former U.S. President Bill Clinton. If the North demands economic or political concessions in return, however, negotiations could hit a wall.

The worker’s release could help normalize operations at the troubled complex. In December last year, North Korea scaled down the hours and number of South Koreans allowed in the complex by land route and restricted the number of South Koreans residing there.

Pyongyang also demanded a huge raise in wages and rent in June, bringing operations to a halt. Worse, the exodus of buyers amid lack of raw materials and blocked logistics resulted in heavy losses for many South Korean companies operating at the complex.

Consequently, many of them have left Kaesong altogether. The head of one of the companies said, however, “The release will restore buyer confidence since it will address employee safety.”

Skeptics, however, said normalizing operations will be tough. Researcher Cho Bong-hyun at Industrial Bank of (South) Korea said, “Hyun’s visit will hopefully mitigate Pyongyang’s restrictions on inter-Korean passage and achieve a compromise on wage issues. But unless North Korea gives up its intention to use the complex as a means to realize its political aims, a fundamental resolution will be far from realized.”

A source at one of the companies operating at the complex said, “There is little possibility that companies that have withdrawn their facilities and workforce will normalize operations anytime soon.”

○ Resumption of tours

Whether Hyundai Asan can resume its tours to Mount Kumgang and Kaesong is attracting attention. The tour to Mount Kumgang has been suspended for more than a year after the North’s killing of a South Korean tourist in July last year. The Kaesong tour has been suspended due to safety fears since early December last year.

Hyundai Asan said its revenue losses from the suspension of the tours reached 153.6 billion won (125 million U.S. dollars) between December last year and June this year. In addition, partner companies lost a combined 60 billion won (48 million dollars).

Suffering a net profit loss of 25.7 billion won (20 million dollars) in the first quarter, Hyundai Asan was forced to downsize from 1,000 to 400 workers after the tours’ suspension.

Despite Hyun’s visit, the immediate resumption of the tours could get complicated since the North will probably expect money in return. Such a payoff will depend on the attitude of the South Korean government as well as the international community.

The company said facilities at Mount Kumgang remain in good hands with resident employees and are ready for immediate resumption of the tours. Even with approval to restart, however, full normalization will require time because of the rehiring and deploying of workers let go after the last year’s shooting.

A Hyundai Group source said, “It will not be easy to resume the Mount Kumgang tour over the short term given the shooting incident and government restrictions. It will be less tough with the Kaesong tour, however, since it can be resumed immediately after approval from Pyongyang.”