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NORTH KOREA NEWSLETTER NO. 102 (April 15, 2010)
*** INTER-KOREAN RELATIONS

North Korea Freezes South Korean Facilities at Mount Kumgang

SEOUL (Yonhap) -- A joint tour program to Mt. Kumgang in North Korea is facing a total shutdown, with the communist state making good on threats to freeze South Korean assets at the mountain resort.

   In retaliation against Seoul's prolonged suspension of cross-border tours, the North told four employees at the South Korean government-run family reunion center to leave the nation within 24 hours. It also sealed the key holes of entrances to five facilities and has posted keep-out stickers.

   The facilities sealed were built and run by the South Korean government and its state tourism agency. They comprise the 12-story family reunion center, a fire station, a spa facility, an arts performance hall and a duty-free shop in the resort. The workers, ethnic Koreans from China, had been overseeing the maintenance of the family reunion center at the resort.

   Notably, the North has not asked two Hyundai Asan employees at the reunion center to leave. Hyundai Asan, the South Korean company overseeing tours to the resort, and other private companies operate hotels, a golf course and a seafood restaurant near the mountain.

   The expulsion of the South Korean workers at Mt. Kumgang follows a series of related threats. In March, the North said it would confiscate all South Korean-owned properties within the mountain resort area unless South Korean owners attended a survey of the facilities.

   The North went followed-through with the survey, sending military officials and Cabinet members to a meeting attended by 37 South Korean company officials.

   Seoul did not send any government officials to the resort because it believed its family reunion center there was not subject to the survey. But North Korea carried out its inspection of the South Korean government-run facility. North Korea on March 25 said it would take "extraordinary measures" if the tour program did not resume by April 1. It announced that it would expel workers the next week.

   The South Korean government called on the North to withdraw its latest actions. Seoul's unification minister, Hyun In-taek, said that further such moves would "gravely damage inter-Korean relations" and that the South would take stern countermeasures.

  Seoul officials have said, however, the freezing of assets will have little actual impact as the facilities have hardly been in use since the cross-border tours to Mt. Kumgang were halted in 2008.

   The joint tourism program to the mountain resort had been an important source of foreign currency for the impoverished North. South Korea suspended the program in July 2008 after a tourist was shot dead by a North Korean guard after entering a restricted area near the resort. Seoul has demanded a state-to-state guarantee of tourist safety, as well as a joint on-site probe into the death, before the tours can resume.

   The tours, which began in 1998, were a prominent symbol of reconciliation between the rival states that are still technically at war. The 1950-53 Korean War ended in a ceasefire, not a peace treaty.

   North Korea's recent move reflects Pyongyang's anger and impatience over Seoul's reluctance to resume the lucrative tours. Feeling the pinch of U.N. sanctions imposed for its missile and nuclear tests last year, North Korea has persistently called for the South to resume the tours.

   The North insists it has done all it can to assure tourist safety, citing a deal that leader Kim Jong-il struck with the head of Hyundai Asan, the tour's main South Korean organizer, last year.

   Despite repeated threats from the North, the government of South Korean President Lee Myung-bak has shown no signs of backing down. It also rejected the North's demand last month that Seoul officials come to the resort to attend the asset freeze, and warned it would hold the North responsible if it causes any damage to resort facilities.

   North Korea has said as its contracts with South Korean operators are no longer valid, it will allow new partners to take over to save the troubled resort area that has been "financially damaged" by the suspension of the tours.

   In recent months, Pyongyang has been actively seeking investment from abroad. It revised the law on the Rason free trade zone to allow investments by South Koreans. North Korea says it may seek a new business partner if the South continues to refuse to resume the tours, possibly indicating partnership with Chinese tour operators.

   Already, Chinese tour agencies have begun tour programs to the mountain resort, days after North Korea declared the exclusive tour business deal with South Korea was over. On April 12, the North's state media said a Chinese tourist delegation visited North Korea, but did not give details on the purpose and itinerary.

   Meanwhile, a travel agency named YTS in Guangdong Province in China is currently receiving travel reservations for a six-day tour package to Mt. Kumgang, Pyongyang, Kaesong, Wonsan and the Military Demarcation Line area that separates the two Koreas.

   Another tour agency based in Suzhou is reportedly receiving reservations for a five-day package to Pyongyang, Kaesong, Mt. Kumgang, Wonsan and the 38th parallel area at a price of 5,400 yuan (US$791) per person. Beijing officially gave the green light to full-fledged Chinese group tours to North Korea in February, after allowing only limited tours to border areas since 2008.

   Under Hyundai's contract with the North, the South Korean company has the exclusive right to run the Mt. Kumgang tourist zone it built just north of the border from 2002-2052.

   Pyongyang's threat is a severe blow to Hyundai Asan. It has called for "earnest dialogue" between the two governments and said it hopes the situation will not deteriorate any further.

   In addition, dozens of South Korean firms hold long-terms leases on roughly 360 billion won (US$310 million) worth of land and buildings in the special tourist zone, including Hyundai Asan's two hotels, Emerson Pacific Group's golf course, and other facilities. A spokesman for the North's tourism development organization said three South Korean businesses will be deprived of their right to operate in the North for failing to participate in its recent survey of South Korean assets in the mountain resort.

   Meanwhile, the North threatened to review the joint Kaesong industrial complex if Seoul does not make efforts to improve relations between the two Koreas. The Kaesong industrial park, which links more than 110 South Korean firms with some 42,000 North Korean workers, is the last remaining symbol of reconciliation between the divided Koreas.

   On April 8, the North's spokesman for the General Guidance Bureau for the Development of Scenic Spots of the DPRK (North Korea) said it would entirely reevaluate its joint industrial park with South Korea if the bilateral relations continue to move along a "confrontational path."

   "The South Korean authorities will pay the price for driving inter-Korean relations to ruin by balking at the resumption of Mt. Kumgang tours," said the spokesman.

   Nearly 2 million South Koreans have visited the Mt. Kumgang resort between its opening and the suspension of tours in 2008. A similar joint tour project to the city of Kaesong on the west coast has also been halted since late 2008, cutting off a significant source of hard currency for the sanctions-hit North.

  (END)