NK Economics Sunshine

Of Fools and Their Money, Pt. 3: Thoughts on the End of Kumgang

North Korea has announced that it will make good on its threat to confiscate the South Korean property at the Kumgang tourist project.

In a statement on Thursday, the North’s Guidance Bureau for Comprehensive Development of Scenic Spots, which is in charge of the tourism, said it is seizing a meeting hall for separated families built by the South Korean government, and a cultural hall, a hot spring spa, and a duty-free shop owned by the Korea Tourism Organization, as well as deporting their management staff, according to the official [North] Korean Central News Agency.

North Korea also threatened a joint factory project at Kaesong, a project that has been dying since the North arbitrarily restricted access to the projects and demanded higher “wages” for the workers (payments that are made directly to the regime and which the workers themselves probably never see anyway).

The announcement comes as a shock to many South Koreans who, to my unending astonishment, really believed that Kumgang was the thin end of the wedge that would pry the DMZ open. Assuming North Korea goes through with this threat — and I really, really hope it does — history should instead remember that Kumgang delayed reunification and the liberation of 23 million wretched North Koreans by providing Kim Jong Il “tens of millions a year in hard cash” to sustain his misrule. The South Korean government forced the Hyundai Asan Corporation to continue with Kumgang long after it all hopes ended that the project would be profitable. Instead, South Korea’s leftist governments subsidized Hyundai Asan, which subsidized Kim Jong Il, even as U.S. taxpayers were subsidizing South Korea’s defense. Hardly anyone ever talked about how Kim Jong Il spent the money, except for the economist Marcus Noland and the investigative journalist Bertil Lintner:

In an October 2000 conference paper, Marcus Noland of the Washington-based Institute for International Economics asserted that money owed by South Korea’s Hyundai company to the North Korean government had gone “into the Macau bank account of ‘Bureau 39’.” The payments were for permission to operate tourist trips to Mt. Kumgang in the North. An official at Hyundai Asan, which organizes the tours, says only that royalties are paid to North Korea through Korea Exchange Bank’s branches in unspecified third countries.

The Congressional Research Service–which provides United States congressmen with background briefings–reported on March 5 last year that “the U.S. military command and the Central Intelligence Agency reportedly believe that North Korea is using for military purposes the large cash payments, over $400 million since 1998, that the Hyundai Corporation has to pay for the right to operate [the] tourist project.”

Noland, an expert on Korean affairs, asserted in his paper that this income was used for “regime maintenance,” or to strengthen the government and its armed forces. Bankers and Western security officials believe this is also the case with money earned from the operations in Europe and the Middle East.

I still remember when travel agencies sold overpriced Kumgang tours to gullible South Korean tourists with gauzy pictures of pretty scenery, yes, but also with politics. The novelty had mostly worn off by 2006, when it was evident that Kumgang had turned out to be something very unlike the gentle warming Sunshine of the fable on which Kim Dae Jung‘s gambled and lost Korea’s best chance at reunification. Tourists were kept within hermetically sealed boundaries that prevented any contact with the North Korean people. They were guided at watched at all times. Photography was tightly restricted. The rocks and cliffs were defiled and engraved with hymns to Kim Il Sung. The resort staff — aside from the waitresses in two restaurants, and plenty soldiers and “minders” — were ethnic Koreans from China, not North Koreans. Tourists who were “too noisy” were forced to write confessions. Those who committed thoughtcrimes were arrested, and the first one caught straying outside the permitted boundaries was shot dead. Kim Jong Il’s refusal to answer for the murder of South Korean housewife Park Wang-Ja that doomed Kumgang. Characteristically, North Korea simply cannot see what the big deal is. So they shot someone. So what? There could hardly be a better illustration of what really makes the North and South Korean systems irreconcilable, and Kumgang such a generous contribution to the propagation of evil … except for the obsence “reunions” at Kumgang that North Korea occasionally allowed between South Korean abductees and their families. If South Koreans expected Kumgang to change the North’s system, North Korea’s treatment of the South Korean press there suggested that the converse was closer to the truth.

What is not to like at the end of this folly? That South Korea’s most vapid, stupid, and morally retarded will weep for it? That its equally vapid admirers in the State Department and the think tanks will be discredited once more? That Kim Jong Il will lose a major source of funding for weapons, yachts, or luxury cars for his generals? That those who willfully financed the world’s most oppressive tyranny will now lose hundreds of millions of dollars? That other potential investors in North Korea — I mean those who have evolved intellectually beyond the use of eating utensils and a fascination with small, shiny objects; after all, stupidity is inexhaustible — might be deterred from sinking more money into a dying tyranny? That the American soldiers still anachronistically defending a country that long ago ceased to appreciate their sacrifices will face an enemy whose equipment might just be in a poorer state of maintenance? That the Götterdämmerung for which millions of North Koreans no doubt secretly long, or the unification that South Koreans increasingly fear, might come a few years sooner?

On the contrary, all of these are reasons to be delighted. And so it always ends for those who try to make deals with Kim Jong Il.


  1. Joshua I must admit that i’m surprised the DPRK did not see the fallout coming. Their ONLY investor now is Greater China. I must ask you are they that naive and bankrupt to not know that according to the civilized world, China already owns Mt. Paekdu? It does not matter how Koreans translate it, The fact is that 99% of the people on Earth know that China controlls a former obscure Korean mountain. More important than a dead Korean Liancourt Rock. It is baffling how the Koreans, both north and sout fight over a worthless rock with the Japanese and Chinese laughing at their stupidity.

    The Americans are growing tired of the peninsula’s temper tamtrums both north and south. Even the Sons of Jumong in the north know that. Either Korea falls in the north or Korea falls as a whole, never have we dedicated our own blood to such an extent to such a tempermental people. * HUB*,…..


  2. I don’t know, Acropolis7, it sounds like you are the one obsessed with “a worthless rock” if you’re gratuitously mentioning it here.


  3. Mt Kumgang is next Kushibo. I’m not obsessed, im just asking why the Koreans do not see this inevitable fate coming. The United States is not going to always be their for Korea. However China will be. And when we are gone, the Chinese will reclaim thier tributary state. So wake up. China will recapture Korea if your northern kin keeps giving them a reason to get involved. And They ARE!


  4. speaking of deals made with KJI, does anyone know how Orascom is doing? suckers.

    they’re just lucky cell towers and a ton of routers are a lot cheaper than laying fiber.

    i wish that after NK screws the SK corporations over Gumgang and Kaesong, that there could be some sort of self destruct button. now that would be cool.



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