October 3, 2005

Mountain resort highlights N.Korea ups and downs

By Martin Nesirky and Lee Suwan

MOUNT KUMGANG, North Korea (Reuters) - High on a mountain
peak in autumn sunshine, two young Korean women exchange
giggled whispers and share a powder compact.

It sounds like a television commercial for cosmetics but it
is a real-life advertisement for the advances in -- and limits
to -- North-South Korean reconciliation and economic
cooperation after decades of Cold War hostility.

One of the women is a South Korean tour guide working for
the Hyundai Asan Corporation that runs trips into the resort
area of Mount Kumgang, just north of the heavily fortified
Demilitarized Zone that has bisected the peninsula for half a

The other is a young North Korean chaperoning and guiding
tourists -- the vast majority of them from the South -- in the
spectacular jagged mountains on her country's southeast coast.

"Kumgang is the cornerstone of reconciliation," said Kim
Young-hyun, a senior vice president with Hyundai Asan who has
spent four years in the North working on a venture that covers
four hotels, hot springs, an acrobatic show, restaurants and
even a South Korean supermarket as well as the mountain tours.

Kumgang is also proving something of a millstone for Asan
and an embarrassment for the government, which does not fund
the venture directly but provides its partners with loans and
sees the project as a symbol of efforts to promote North-South

North Korea halved the number of tourists allowed to visit
Kumgang to 600 a day from September 1 after Hyundai Asan's Kim
Yoon-kyu, who had built close ties in the North, was sacked as
chief executive officer although retained as vice chairman.

Kim Yoon-kyu was convicted in 2003 but later amnestied for
his part in giving the North $500 million before then president
Kim Dae-jung met North Korean leader Kim Jong-il in 2000.

The Hyundai Group said in this case Kim Yoon-kyu had
diverted money, for example by inflating construction bills for
work in the Kumgang area. In total, he raised 820 million won
illicitly, the group said in a statement.

Kim was not available for comment. Hyundai Asan officials
said they expected the North to ease the limit soon.

"We may not be able to make as much money," said Koo
Eun-hye, a 20-year-old North Korean guide on one of the
mountain trails. "But money is not as important as trust and
building a bond."

Koo and other selected North Koreans, as well as ethnic
Koreans from China, work in the resort. But the rest of the
North's 22.5 million population is on the other side of a green
wire fence that separates the area from North Korea proper.

Visitors peering through that fence from tour buses saw
scattered North Koreans of all ages harvesting maize and rice
slowly by hand in contrast to the machinery devouring fields of
crops at speed in the South on the other side of the border.

"I was so surprised how poor everything looks," said Lee
Gil-sun, a 70-year-old South Korean whose daughter-in-law urged
her to take the trip before she dies. "But it's nice to be


By the end of August this year, 1.1 million tourists had
taken the tour. Of them, just 5,072 were not from South Korea,
according to figures from Hyundai Asan, which is owned by a
range of firms in the Hyundai Group and some individual

Hyundai Asan is eager to attract foreign visitors and
investors and has had initial talks with fund managers and some
international hotel chains, including Hilton and Hyatt, but no
deals have emerged yet, said Dan Byun, the firm's senior
manager in charge of attracting outside capital.

It needs the money. Late Hyundai founder Chung Ju-yung, a
native of the Kumgang area, started the project as a labor of
love but it has not made a profit despite $1 billion injected
to build up a resort that promises "the sensation of a
lifetime" and projects such as the Kaesong industrial park on
the other coast.

A cruise ship was the only way to reach Kumgang from the
South when tours began in November 1998 until two years ago
when a new road was opened through the Demilitarized Zone.

"In 1998 there was nothing here," said Kim Young-hyun.

Now most days hundreds of tourists take the short bus ride
from the capitalist South to the communist North and swarm up
the mountains along designated tracks where North Korean guides
will chat to you but also keep an eye out.

"We are a single nation, so it is very good we can contact
each other," said Kim Won-chol, a 28-year-old man assigned to
the area as a mountain rescuer. Guides are generally more
talkative than in 1998 and some also sell tourist trinkets as
North Korea allows some market enterprise.

Soon, a train will make a trial run along a track close to
linking North and South on the east coast. Workers are building
train stations and new border control points on both sides of
the frontier where a lone pole marks the actual border.

Hyundai Asan officials hope the combination of the train
and road route plus two planned golf courses will help to
entice more people to make the trip.

Geopolitics still gets in the way, however.

North Korean guides -- seemingly well-briefed -- refer to
the recent round of six-party talks and consistently espouse
the official position that the United States should give
Pyongyang light-water nuclear reactors before the North gives
up atomic weapons.

Washington says that misreads the joint statement agreed in
Beijing in mid-September. Foreign investors are still wary.

"I want to be the first," Byun quoted them as telling him
in typical first reactions to their exploratory visits to

But they add: "Dan, I need more time."

(Additional reporting by Rhee So-eui and Jack Kim in Seoul)