`Suspended NK Tour to Incur Losses of $1.6 Bln`

South Korea will suffer 1.6 billion U.S. dollars in losses from the suspension of tours to North Korea, a source said Wednesday.

At a lecture on the future of the Mount Kumgang tour Wednesday, Korea Logistics Forum Chairman Kim Young-yun said, “The tangible and intangible economic losses of South Korea due to the suspension of inter-Korean tours will surpass 1.84 trillion won (1.6 billion dollars).”

He gave estimates on the expected losses, including those for Hyundai Asan Corp. from fees paid to North Korea in exchange for the right to lead the tours and facility investment (1.32 trillion won or 1.18 billion dollars); investment by other companies such as Korea Tour Organization and Emerson and the South Korean government (188 billion won or 168 million dollars); tour sales losses of Hyundai Asan (236.8 billion won or 211.52 million dollars); sales losses of the company’s subcontractors (93.9 billion won or 83.88 million dollars); and sales losses of the Goseong County area of Gangwon Province (1.3 billion won or 1.1 million dollars).

A South Korean government official said, “The expected losses of the South Korean government and companies are hard to calculate since they differ depending on the estimation method, the number of expected tourists, and future developments.”

“The Hyundai Group paid 500 million dollars to North Korea in 2000 in exchange for the right to exclusively run seven businesses in the North. It cannot be considered a loss resulting from the suspension of the inter-Korean tours, however.”

Initially, Hyundai Asan promised 942 million dollars to Pyongyang in travel fees but has not paid 486.7 million dollars due to the tour suspension. Kim said the travel fees not paid by Hyundai Asan should be considered a loss because the North will confiscate properties owned by the company. On the other hand, the government said this is not a loss.

Seoul said private South Korean companies including Hyundai Asan have invested a combined 359.35 billion won (320.9 million dollars) to set up infrastructure and accommodations such as Kumgang Family Beach Hotel. The South Korean government spent 59.86 billion won (53.47 million dollars) to build a reunion house for separated families, fire station and roads for sightseeing.

Overall, South Korean government and companies have invested 419.21 billion won (374.46 million dollars) in the tourist venture, 1.4 trillion won (1.25 billion dollars) smaller than Kim’s estimate.

The government official said, “Among private companies, only Nonghyup, which subscribed to inter-Korean economic cooperation insurance, can receive a claim of 400 million won (360,000 dollars) or smaller.”

“Other companies including Hyundai Asan and its subcontractors borrowed seven billion won (6.25 million dollars) from inter-Korean cooperation funds last year to make up for operating losses. After closely watching the developments, the government will consider additional monetary support.”

kyle@donga.com