October 20, 2005

North Korea says reconsidering business with South

By Martin Nesirky

SEOUL (Reuters) - North Korea is reconsidering how it does
business with the South because its main partner, part of the
Hyundai Group conglomerate, sacked an executive with close ties
to leader Kim Jong-il, the North said on Thursday.

Earlier this month, the Hyundai Asan subsidiary that
handles projects worth about $1 billion in the North severed
its last tie with Kim Yoon-kyu, who had already been sacked as
president of the firm in August for what the company said was

"This incident has proven Hyundai's lack of trust," said a
North Korean spokesman, quoted by the official KCNA news
agency. "We will have to reexamine and readjust all the
businesses conducted with Hyundai."

Although it was not immediately clear whether Pyongyang
would follow through on the rhetoric, any undermining of
Hyundai Asan's role at an industrial park and tourist resort in
the North could have a potentially profound effect on bilateral
relations just as they seemed to be gradually warming.

Hyundai Asan was seemingly surprised by the comments from
an unnamed spokesman for the Asia-Pacific Peace Committee that
governs North-South business ties.

"We just saw the news," a Hyundai Asan spokesman said by
telephone. "We don't have any comment right now."

But Hyundai Group chairwoman Hyun Jeong-eun sent a letter
to Hyundai Asan employees on October 10, referring to Kim

"We recently had a big operation to remove a large boil
inside our body. If we hadn't cut that out, it could have grown
bigger and forced us to cut off arms or legs," she said. "While
we are in recovery, our old friend refuses to see us again,
saying we look different."


Hyundai Asan has said in a statement it suspected Kim
Yoon-kyu, a trusted confidant of the North Korean leader, of
siphoning off about 820 million won of company money for
personal use. Kim Yoon-kyu was not available for comment.

Hyun said Hyundai Asan and North Korea had a long history
of friendship and difficulties could provide a springboard to
allow the firm's North Korean business to grow further.

A South Korean government official said on condition of
anonymity the North could mean the reverse of what it was

Its economy is in ruins and so outside help is vital,
despite the leadership's home-spun "juche" philosophy of

Although the government has been keen to stay out of the
row, South Korean officials will get a chance to quiz the North
if they wish at economic cooperation talks scheduled for next
week in Kaesong, the North Korean city that lends its name to
the industrial park Hyundai Asan is building nearby.

"The North appears to think there is a need to resolve the
current problems early because losses are continuing," said
Vice Unification Minister Rhee Bong-jo at a briefing.

The North is expressing its disappointment with Hyundai but
still likely wants to move on with its business partner, he

The North has already halved to 600 the daily number of
South Korean tourists it allows to visit the Kumgang mountain
resort to the north of the Demilitarised Zone frontier on the
opposite coastline from the Kaesong industrial park.

KCNA quoted the North Korean spokesman as saying Pyongyang
would try to find another company to work with to set up tours
around the city of Kaesong. One conglomerate, the Lotte Group,
has already said it turned down North Korean advances.

(Additional reporting by Rhee So-eui, Jack Kim and Lee