Hyundai’s Inter-Korea Projects Fall into a Quagmire

The employees of Hyundai Group are getting anxious and frustrated over the nuclear test which North Korea allegedly conducted Monday, in spite of warnings from the international society.

As security threat is escalating on the Korean peninsula, inter-Korean businesses of Hyundai Asan, a subsidiary of Hyundai Group, including the Mount Geumgang resort and the Gaesong Industrial Complex may all collapse.

If international sanctions start to be imposed against Pyongyang in earnest, the Korean government’s punitive actions will also inevitably follow. Analysts believe its first step would be stopping the Mount Geumgang tourism and Gaesong Industrial Complex projects.

However, suspension of the two projects will strike a critical blow to Hyundai Asan. This may even cast a dark cloud over the fate of the entire Hyundai group.

Hyundai has already lost too much from its inter-Korean businesses which invested an excessive amount of capital without a thorough feasibility review since the beginning of the Kim Dae-jung administration. It is largely due to Hyundai Group founder Chung Ju-young’s dogmatic decisions and collusion with the government.

Hyundai Group colluded with Kim’s administration, which was pushing ahead with the “Sunshine Policy,” and wired $450 million illicitly just before the summit between the two Koreas in 2000. Hyundai has poured some $1.6 billion into North Korea so far, including the illegal transaction.

However, Hyundai’s investment hasn’t returned an actual profit. The conglomerate was rather severely damaged by its inter-Korean projects. Hyundai Group’s leader Chung Mong-hun even killed himself while under investigation for his alleged part in an illegal cash payment to the North. North Korea has been also showing signs to exclude Hyundai, whose cream has been skimmed off by the North, from major projects in North Korea.

”If Hyundai’s businesses in North Korea eventually turn out to be a failure, people will criticize the company, saying it has caused a great burden for the national economy,” an official of a Korean conglomerate said.

“Hyundai has invested too much in North Korea based on political reasons, and it is now paying the consequences of it,” he said.

Experts believe Hyundai has fall into a dilemma over its businesses in the North.

“Hyundai has fallen in the mire in which it can not get out by governing groups which have been using the inter-Korea relations in domestic politics. Now, Hyundai cannot give up its North Korean businesses even if it wants to,” an official of an economic organization said.

Meanwhile, some business owners say Hyundai is the primary victim of the inordinate “Sunshine Policy.”

“The tragedy of Hyundai well illustrates that a certain business can face a major crisis if it is exploited by a political purpose and the political situation changes,” Lee Man-woo, a professor of Korea University, said.

sunshade@donga.com