Once regarded as a symbol of inter-Korean cooperation, tours to Kumgangsan in North Korea are on the brink of losing their South Korean touch, as the North seeks to transform the scenic mountain into an international tourism attraction for global visitors.

North Korean leader Kim Jong-un last month ordered the demolition of South Korea-funded facilities at the resort complex by the mountain north of the inter-Korean border.

Alarmed by the announcement, the South Korean government proposed working-level talks last week, but the North flatly rejected this.

The South Korean government is now agonizing over what approaches it can take to soften the North’s hard-line stance and protect the hefty investments made by South Korean enterprises while complying with international sanctions imposed on the North.

Weight of Kim’s words

Seoul’s interpretations of the North Korean leader’s remarks are divided, with some expressing concerns over possibly losing the inter-Korean project for good. Others have expressed hope that it could be a chance for the two Koreas to sit down for talks and bring about a thaw in strained relations.

In response, the South Korean government said it would come up with a “creative solution, hinting at cooperation in overhauling the Kumgangsan complex, which has been neglected for nearly a decade since tourism to the area was suspended in 2008.

However, Pyongyang appears to want the removal of facilities, not a discussion with Seoul, said Hong Min, a research fellow at the Korea Institute for National Unification.

“It’s like North Korea telling South Korea, ‘We have decided to tear them down, so come and execute,’” he said.

The South also seems to be overlooking the fact that it was Kim who issued the order and his words carry the most weight. North Korea has made clear that its policy is not to conduct cooperative business with South Korea, Hong said.

The Unification Ministry is likely to make a second attempt at proposing face-to-face talks with North Korea this week, though the regime has insisted on working out details through the exchange of documents.

“The North will eventually remove the South’s facilities, as it was Kim Jong-un’s order,” said Koh Yu-hwan, a professor of North Korean studies at Dongguk University. 


Reasons not to give up Kumgangsan tours

The Kumgangsan tours involve not only the government but also companies that chipped in millions of dollars in the hope that tourism would bridge the divide on the Korean Peninsula. Even if the investments were made for patriotic reasons, no company likes to lose money.

Hyundai Asan, the inter-Korean business unit of South Korean conglomerate Hyundai Group, holds a 50-year license for operation of the tour program and has invested 786 billion won ($677 million), including 559 billion won worth of fees to the North Korean authorities.

The facilities and buildings it owns include the floating Haegumgang hotel, restaurants and a banquet hall. It operated two 12-story hotels -- the Kumgangsan Hotel and the Oekumgang Hotel -- until the tours were suspended in 2008 because a North Korean soldier shot dead a South Korean tourist who strayed off the approved path.

“Hyundai Asan is an operator and it invested 230 billion won just for the buildings. We can’t sit on our hands on the matter,” said Lee Jae-hee, a Hyundai Asan spokesman.

Under a 2000 investment guarantee agreement signed between Seoul and Pyongyang, aimed at protecting investors from mistreatment when a commercial dispute cannot be settled through consultation, investors are able to refer the case to an arbitration committee, formed based on consent between the Koreas.

Lee said he does not want to prejudge what will come up but “all possibilities will be on the table” if the worst case scenario happens.


Safety guarantee and complex sanctions

The government seems to be considering ways to generate sizable tourism demand for Kumgangsan, to keep the joint business intact and draw a response from North Korea.

Given that the Kumgangsan area has been used as a venue for the reunion of separated families, Seoul may suggest opening a permanent meeting place for the separated families and launching a tour program to visit their hometown.

Allowing individual visits to the North Korean mountain has been deemed as the most likely offer that the South will make if working-level talks take place. Senior officials here, including Foreign Minister Kang Kyung-wha, have noted that individual visits are not subject to UN Security Council sanctions.

However, UNSC member states are prohibited from transferring assets or resources, including bulk cash that could contribute to North Korea’s programs and activities related to nuclear weapons, ballistic missiles and other weapons of mass destruction.

“Sanctions are multifaceted. We have to carefully review various activities involving individual tourism. US sanctions are another issue that we also have to consider,” said Park Il, deputy director-general at the disarmament and nonproliferation division at the Foreign Ministry.

For example, fees for individual trips should not be sent to people or organizations that have been slapped with sanctions. Carrying a notebook computer to the North for travel is also forbidden.

Opening an escrow account for tour payments, to enable the North to withdraw money from the account when the regime takes steps for denuclearization, is speculated to be one way to prevent the inflow of bulk cash into the North.

The UNSC resolution does not specify lower or upper limits for bulk cash.

A safety guarantee for South Korean tourists has also been regarded as a prerequisite for the resumption of tours. North Korea has not made an official apology for the fatal shooting of the South Korean woman at the Kumgangsan resort in 2008.

By Park Han-na (hnpark@heraldcorp.com)