Sangwon Yoon

North Korea Hires U.S. Firm to Lure Tourists to Shuttered Resort
2012-02-09 23:14:58.935 GMT

By Eric Martin and Sangwon Yoon

Feb. 10 (Bloomberg) -- Cash-starved North Korea has hired an American company to help it revive a shuttered luxury resort and attract tourists, a plan that has raised objections from Seoul.

Korea Pyongyang Trading USA, a New York-based liquor importer, is working on a plan to attract travelers to Mount Geumgang on the east coast of North Korea, a country the U.S. State Department permits Americans to visit while warning it has a history of arbitrarily arresting foreigners.

The “Diamond Mountain” resort, opened in 1998 by the two Koreas as a symbol of hope for reunification, has been closed to South Koreans since 2008, when the late Kim Jong Il’s troops shot and killed a guest walking on a restricted beach. Simon T. Bai, 67, director of marketing and planning for Korea Pyongyang, said the company wants Americans to visit North Korea to give the nation exposure to freedom and democracy. The company was hired in July to study opening a casino at Geumgang, according to documents it submitted to the U.S. Department of Justice in December under the Foreign Agents Registration Act.

“We’re doing this with hopes that resuming tours to Geumgang could help open North Korea up, and thereby help unite the two Koreas again,” Bai said in a telephone interview from his home in Queens, New York, which serves as the company’s headquarters. “Isn’t this the kind of business that’s really worth doing?”

Unit of Hyundai

The South Korean government sees it differently. It says the plans infringe upon the rights of Hyundai Asan Corp., Seoul-based company that was the resort’s operator until South Koreans were banned. Hyundai Asan is a unit of Hyundai Group, the holding company best known in the U.S. for having once owned Hyundai Motor Co., South Korea’s largest automaker. Hyundai Asan spent $487 million building the resort.

“Hyundai Asan exclusively holds the license to operate tours at Mount Geumgang, and it is unfair to give business to others,” Park Soo Jin, the deputy spokeswoman of South Korea’s Unification Ministry, the government agency charged with working toward recombining the two Koreas, said in a telephone interview. “This is what we have clearly specified and it is a wrongful violation of the agreements to act otherwise.”

Mountain Peaks

Hyundai Asan hasn’t officially received any information from the North about its agreement with Korea Pyongyang, the company said in an e-mail responding to a Bloomberg query last week.

Bai declined to comment on Hyundai Asan. North Korea and the U.S. don’t have diplomatic or consular relations, and North Korea’s mission at the United Nations in New York said it didn’t have any information on plans for the resort.

The project around Mount Geumgang spans 37 miles (60 kilometers) near the demilitarized zone, capped by mountain peaks rising more than 5,000 feet (1,524 meters). The resort, which features an 18-hole golf course, karaoke bars and hot springs, was one of several projects aimed at building relations between the two Koreas, which remain technically at war since the 1950-53 conflict ended in a cease-fire, not a peace treaty.

It drew more than 1.9 million South Korean tourists from its opening in 1998 until the suspension of the trips in 2008, according to the south’s Unification Ministry. The resort’s opening set the stage for a summit in Pyongyang between the North and South in June 2000 -- the first since the peninsula was divided.

Korean Vodka

Mount Geumgang is Korea Pyongyang’s first foray into tourism. The company’s previous business consisted of importing North Korean beer and soju, a vodka-like beverage distilled from rice. Those shipments ended in 2008 when customers stopped buying North Korean liquor as inter-Korean relations began to deteriorate over the shooting of the South Korean tourist and after the North conducted a nuclear test, Bai said.

Its agreement with North Korea calls for the government and Korea Pyongyang to jointly operate Geumgang. North Korea chose the company because its chief executive officer, Steve Park, has “extensive” connections within the upper echelons of the North Korean regime and a history of doing business with them, Bai said.

In August, Park visited the North Korean capital of Pyongyang and extended the deal through 2016, according to the Justice Department filings. Bai declined to disclose the company’s revenue. Bai was the only company employee besides Park listed in the Justice filings.

Economic Sanctions

Steve Park, also known as Park Il Woo, is a South Korean citizen who holds permanent residency in the U.S. He pleaded guilty in 2007 to lying to the U.S. Federal Bureau of Investigation about his contacts with officials from South Korea and served 18 months of probation, according to court documents. Park didn’t respond to requests for comment.

Bai said his company is focused mainly on attracting Korean Americans who left the peninsula and are still nostalgic for their homeland.

The North Korean regime is strapped for cash after the UN and the U.S. tightened economic sanctions in 2009 and 2010. North Korea’s economy is less than 3 percent the size of South Korea’s and has relied on economic handouts since the 1990s, when it experienced a famine.

U.S. trade sanctions imposed to pressure North Korea to abandon its nuclear weapons program prohibit most investment by Americans. Transactions that facilitate travel are permitted.

Traveler Advisory

Bai said the company is checking with U.S. authorities at each step to make sure it remains in compliance with relevant laws, policies and sanctions.

People in the U.S. don’t need government permission to travel to North Korea, according to the U.S. State Department. The agency warns visitors that the North Korean regime confiscates tourists’ cell phones, monitors their hotel rooms and phone calls and considers unauthorized attempts to speak with its citizens as acts of espionage. Visitors are subject to arbitrary arrest and imprisonment without protection against inhumane treatment, the agency says.

Walter Keats, the founder of Wilmette, Illinois-based Asia Pacific Travel Ltd., estimates that about 300 to 500 North Americans visit North Korea each year through a variety of tour operators, including many in Europe. Keats has been to North Korea 28 times and led groups of tourists to sites there, including Geumgang when Hyundai Asan was operating it.

“This is not for the Holiday Inn crowd,” said Keats in an interview.

North Korea may be focused on attracting visitors this year because April 15 marks the 100th birthday of Kim Il Sung, the grandfather of the leader Kim Jong Un, who founded the nation in 1948 and ruled until his death in 1994.

“This is not a vacation,” Keats said. “You need to be there because you’re interested in learning about the history and the culture.”

--With assistance from Kyunghee Park in Singapore, Seonjin Cha in Seoul, Patricia Hurtado and Flavia Krause-Jackson in New York and Bennett Roth in Washington.