As firms court N. Korea, money isn't only motive

Washington Post Foreign Service/November 10, 2000
By Doug Struck

As the closed gate to North Korea creaks slowly open to outside business people, one of the first to have slipped inside is an unlikely figure: the Rev. Sun Myung Moon, leader of a church banned in the North and a controversial figure with a long history of communist-bashing.

A company owned by Moon's Unification Church plans to open the first heavy manufacturing plant in North Korea in decades. Moon is one of a diverse cast of competitors willing to seize on the cautious opening and play in a business netherworld of shadowy contacts, broken deals and obscure motives. "It's sometimes hard to tell who are friends and who are enemies," said Yoon Dae Gyu, a business analyst in Seoul watching North Korea's blossoming contact with the outside.

That cast includes a geriatric South Korean tycoon who some say is hoping to salvage his family's control of a huge conglomerate, eager American businessmen pushing for the final end of U.S. sanctions, and disgruntled veterans of a shadowy trade who see the loss of their privileged connections to North Korea through China.

And it includes Moon, once jailed in North Korea, who plans, quixotically, to start producing automobiles in country with an acute power shortage and where it would take 10 years of an average worker's annual income to buy a car.

"We're different than other companies. They are only thinking of money. We have other goals," said a longtime Moon associate, Park Sang Kwon, who as president of Pyeonghwa (Peace) Motors is overseeing construction of two factories in North Korea.

But many of the businessmen seeking entry into North Korea, which is beginning to emerge from its isolationist shell, have motives other than just profit. The two biggest rivals, Moon's group and the giant South Korean Hyundai Group, both say they are spurred by a patriotic desire to mend the rift that split North and South Korea 55 years ago.

"That's what makes our company different--the ideology," Park said. The Hyundai Group won an early competition with Moon's firm by offering North Korea nearly $1 billion for a scenic mountain tourist attraction that will take years to break even.

The company's officials say the investment was spurred by the sentiments of Hyundai founder Chung Ju Yung, 85, who was born in the North and wants to see Korean reunification. And, they add, payment for the Mount Kumgang tourist facility "is the price of admission" to other projects, including a planned industrial park and tours for visitors to Kaesong, near the North-South border.

Until the historic Korean summit smoothed relations in June, "it was a risky investment, a bet," said Jang Whan Bin, a top officer of Hyundai's Asan division, which is handling North Korea. "But our bet was right. Even if we lose money at Mount Kumgang, we can recover it at other projects." But Hyundai's expensive foray into the North has raised suspicions that the move was designed to please the South Korean government and thereby stave off reformist moves in Seoul to break up the family's stranglehold on the debt-heavy conglomerate.

"They clearly aren't going to make money there for a while. So there must be other reasons for Hyundai," said a Seoul-based analyst. He, like many in South Korea's small financial circles, is wary of being publicly critical of Hyundai, the country's largest conglomerate, or Moon, who has extensive business holdings and political contacts.

But Moon's presence in North Korea has raised eyebrows among those who wonder if his effort is for politics, business, or to try to gain a toehold for his church. "They have broad interests, maybe including religious," said Yoon.

"Mr. Moon wanted to make a church in North Korea," acknowledged Lee Tak, chief of the planning department for Pyeonghwa Motors. "But we want a separation between religion and business. Making a church [in North Korea] is not our business."

Whatever the motivations, the jockeying among both large and small players is being played at the wild edge of the business world, where there are few rules and many shadowy figures.

North and South Korean economic officials met recently to begin adopting the most basic rules for business deals, including agreements on avoiding dual taxation, and procedures to make payments on accounts and settle disputes. Ironically, some of those who have been dealing for years with North Korea do not welcome the moves. They see the loss of the routes they had quietly--and expensively--paved into the country.

"The South Korean government has put a hold on all business. The ministers want to get all the credit," said businesswoman Kim Bo Ae, who has had her plans to bring North Korean entertainers to Seoul frozen. "But they are only beginners. They should have met people like me, who have experience, and [have approved] our contracts first."

For years, the only route to doing business in North Korea for South Koreans such as Kim was through Beijing. There they could rendezvous with North Korean contacts whose authority was hazy and whose cooperation was often won with bribes. It was a shadowy business filled with danger at a time when contact with the enemy could earn a long prison term.

"I was a watched person," said Kim, who managed to bring North Korean acrobats to perform in the South and is pursuing a jointly made movie. "I had to report to the Korean CIA all the time. I had to report who I met. It was so hard."

After the June 13-15 summit between the leaders of North and South Korea, conditions changed--but not yet for the better, she said. "I am liberated" from the cloak-and-dagger contacts, she said, "but now the government wants [the business] all to itself."

Since the summit, both governments have begun to rein in the unofficial contacts and channel business through a formal committee. Jeffrey D. Jones, an international lawyer and chairman of the American Chamber of Commerce in South Korea, welcomes that change for reasons of stability, he said.

Jones has been trying to bring a delegation of American firms to the North since October 1999, when the United States began to ease economic sanctions. He got a go-ahead for June 27 from Pyongyang, and arranged a delegation of seven company presidents, including the heads of the Seoul divisions of Procter & Gamble Co., Oracle Corp. and Motorola Inc., he said.

"Then two days before we were to depart to China, they said they are going through an organizational change. They wanted to delay," Jones said. "They have their own schedule."

In North Korea, the biggest deals hinge on the okay from one man--the "chairman" of the country. In 1991, Moon thought he had that okay, from Kim Il Sung, the country's founder and longtime ruler.

They were an odd business couple. Moon was born in the North, declared himself a messiah to finish the work of Jesus Christ and was briefly imprisoned by North Korea before he was freed by U.N. and U.S. troops in the Korean War. He had checkered relations with a variety of governments; he was imprisoned in the United States for tax evasion and accused of secret ties with right-wing governments in Seoul. But his most strident political activity was thumping anti-communism and criticism of the North Korean regime.

While building his Unification Church, his organization has engaged in a bewildering array of hundreds of business ventures around the world--from gun manufacturing to ownership of the Washington Times to the Nostalgia Channel to projects offered to local schools in Japan to teach students a love for humankind.

In 1991 Moon surfaced in Pyongyang in a meeting with Kim Il Sung, emerging with a joint pronouncement lauding Korean unity and a 30-year monopoly for Moon to develop tourism at Mount Kumgang, a sacred mountain for Koreans on North Korea's eastern shore.

But Moon was not the only one who saw the chairman as the route to the North. After Kim Il Sung died in 1994, Hyundai's founder, Chung Ju Yung, made entreaties to his son and successor, Kim Jong Il.

Chung brought gifts. He drove 1,000 head of cattle across the border to the starving North in 1998, sent a ship filled with corn, began building an athletic center in Pyongyang, donated four greenhouses and helped set up a roof-tile factory. And he offered a bundle of money for tourist rights to Mount Kumgang, notwithstanding Moon's "monopoly rights" from Kim's father. Hyundai and Moon's company had a brief and fierce competition for the project; the church-backed organizers tried to start a high-speed ferry to get tourists to the mountain first. But then Moon bowed to Hyundai's deeper pockets.

"North Korea sees Hyundai as a cash cow," said Yoon, a specialist with Kyungnam University. Pyongyang "needs U.S. dollars, and Hyundai pays a lot." In North Korea, no court can tell the country's totalitarian leader he breached a contract. Kim Jong Il awarded the Mount Kumgang project to Hyundai.

"Mr. Moon was like a brother with Kim Il Sung. They had an agreement," acknowledged Jang, of Hyundai. "But Kim Il Sung died. And Kim Jong Il has an agreement with us."

Moon's group relates a slightly different version of events. "When Hyundai offered a big amount of money for Kumgang, we thought that was best for North Korea. We have true love," said Park, the company president. "So we made a deal. They got Kumgang and we got Nampo."

At Nampo, a North Korean port 25 miles outside the capital, Pyeonghwa Motors entered into a joint venture with North Korea and has built the shell of two factories. The first, which Park said is already operating, imports used Japanese cars and buses to retool them for right-hand driving in North Korea and elsewhere. And it offers car repair services for the aging fleet of official North Korean limousines in Pyongyang, about the only cars visitors see on Pyongyang's wide, clean boulevards.

But by December next year, Pyeonghwa Motors expects to begin manufacturing low-cost Fiats and Alfa Romeos, Park said. And in a few years, Park said, he expects to begin manufacturing a new North Korean model sedan for domestic sales and export.

If car making seems an odd venture for an impoverished and power-starved country, Park is undeterred.

"The labor is cheap, and there are no unions there," he said. "In Nampo, we can start making money immediately."