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The Kaesong Industrial Complex on Feb. 6

Following the launch of a new government in South Korea led by president Moon Jae-in, expectations are increasing about the possibility of restarting inter-Korean economic cooperation, including the Kaesong Industrial Complex and tourism to Mt. Keumgang. Hyundai Asan and tenant companies at the Kaesong Complex are urging the government to quickly resume such cooperation.

“During the conservative administrations of the past nine years, inter-Korean relations have taken a giant step backwards. Reopening the Kaesong Industrial Complex is the starting point for a peaceful economy on the Korean Peninsula. We call on the government to quickly reopen the complex,” the association for South Korean companies at the Kaesong Complex said in a statement released on May 10. The complete shutdown of the complex in Feb. 2016 caused the 125 tenant companies there to lose assets. The association estimates that these companies have suffered around 1.5 trillion won (US$1.32 billion) in damage because of the shutdown, including invested assets such as buildings and machinery (590 billion won), raw materials and other movable assets (240 billion won), penalties in supply contracts (140 billion won) and a year’s worth of business losses (310 billion won). But the government has only provided them 480 billion won (US$423 million) in aid. “The tenant companies are currently at the crossroads of life and death,” the association said.

Hyundai Asan, the company that ran tours to Mt. Keumgang (which have been suspended since July 2008), is preparing for the resumption of tours. “We expect that the new government will work to quickly establish a mood for dialogue in inter-Korean relations. This has been a difficult time for us, but we aren’t abandoning the Mt. Keumgang tourism project, since [Hyundai founder] Chung Ju-yung established Hyundai Asan to run inter-Korean cooperation projects,” said Lee Jae-hee, an executive at Hyundai Asan.

The suspension of tourism to Mt. Keumgang is estimated to have caused Hyundai Asan more than 1.07 trillion won in lost sales over the past nine years. This opportunity cost was calculated by considering the operating profits (19.7 billion won) earned in 2007, when 340,000 tourists visited Mt. Keumgang. Since then, the company has slashed its staff from 1,084 to 175. As part of a rescue plan, Hyundai Asan has moved into the areas of construction, distribution and carbonated water, enabling it to stay afloat. The company‘s losses were compounded by the shutdown of operations at the Kaesong Complex. Hyundai Asan was the developer and business operator for the first three stages of the Kaesong Complex.

In the section of his campaign platform dealing with inter-Korean economic cooperation, Moon Jae-in laid out a plan to draw up a new economic map for the Korean Peninsula that would combine North and South Korea into a single market. This plan includes promoting inter-Korean economic cooperation in order to expand North Korea’s domestic market and promoting the creation of an energy and resource belt around the East Sea, an industry, logistics and transportation belt around the West (Yellow) Sea, and an environment and tourism belt around the East Sea and the DMZ. “Integration of the North and South Korean markets and economies and resumption of inter-Korean economic cooperation, including the Kaesong Industrial Complex, by drafting the new economic map for the Korean Peninsula is expected to also have a positive influence on stimulating the South Korean economy,” said a report about the expected effectiveness of the new administration‘s policy toward North Korea released by the Hyundai Research Institute.

But some think it won’t be easy to resume tourism to Mt. Keumgang and to reopen the Kaesong Industrial Complex, given the tensions about the North Korean nuclear program. “Many really expect the new administration to be proactive about exchange and cooperation with North Korea. But given the challenging situation in Northeast Asia, I think it will be difficult for the new administration to suddenly reach out to North Korea and propose negotiations for reopening the Kaesong Complex and resuming tours to Mt. Keumgang,” said a member of the emergency economic measures team for Moon’s campaign.

In related news, expectations that inter-Korean exchange and cooperation projects would be resumed after the launch of the new administration spurred a rally on the stock market on May 10 by certain firms involved in inter-Korean economic cooperation, with Sinwon’s stock rising by 29.78%, Good People by 12.13% and In the F by 4.02%.

By Cho Kye-wan, staff reporter

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