When South Korean President Kim Dae Jung opened the door to business with the North two years ago, dozens of southern companies answered the call to “Go North” and begin the work of rebuilding a unified nation. A few have managed to make a profit in North Korea. But most have suffered heavy losses, adding up to hundreds of millions of dollars. Bad investments in the North contributed to the ongoing breakup of South Korea’s Hyundai conglomerate. Companies that ignored Kim’s call have profited from their caution. Late last year Samsung, which did not plunge into the North, supplanted Hyundai as the South’s largest enterprise.
It’s not just that the glow has gone from Kim’s so-called Sunshine Policy (thanks in part to President Bush’s leery view of it). Joint ventures have flopped, because North Korea is still dismally backward and stubbornly Stalinist. Labor is cheap, but communications, power and transportation systems are in disarray. Rigid and suspicious of outsiders, the country’s communist bureaucracy tends to stifle initiative rather than encourage it. According to one frequent visitor, several southern businessmen were kicked out of North Korea after they refused to pay homage at Pyongyang’s giant statue of the regime’s Great Leader, the late Kim Il Sung. Communist officials often turn business negotiations into something like water torture. “They make you wait, wait and wait,” says a South Korean executive, “until you are burned out.”
Some southern businesses also have been burned by their own nationalistic zeal. Hyundai’s late founder, Chung Ju Yung, had his company invest about $600 million in a tourism business, partly because he wanted to help his famine-stricken ancestral village near Mount Kumgang. The venture turned out to be a loser; the North insisted on making itineraries soporifically dull. Hyundai has recouped only about $200 million of its investment–and seen very little sunshine.
