South Korean Identities in Strategies of Engagement with North Korea: A Case Study of President Kim Dae-jung's Sunshine Policy Volume II Son Key-young A dissertation submitted in fulfilment of the requirements for the degree of Doctor of Philosophy GRADUATE SCHOOL Of EAST ASIAN STUDIES UNIVERSITY OF SHEFFIELD June 2004 Chapter Six. Case Study II: Hyundai's Mt. Kumgang Tourism Project 1. Introduction This case study seeks to bring to light the interplay of mUltiple actors and their diverse ideas involved in a controversial cross-border tourism project implemented by Hyundai, one of the largest South Korean conglomerates, and their collective contributions to South Koreans' identity shifts vis-a-vis North Korea and inter-Korean economic integration. The inseparability between the Hyundai project and President Kim's Sunshine Policy raises the two conflicting questions: 'was the Hyundai project simply a brainchild of the Sunshine Policy?' or 'was it the Hyundai project that helped jumpstart the Sunshine Policy and rescued the initially ill-fated policy?,l These questions are reminiscent of the time-honoured query: 'What came first, the chicken or the egg?' In fact, the strategic convergence of the Sunshine Policy and the Hyundai project made it possible for South Koreans to travel to North Korea for the first time in five decades of national division. Therefore, supporters of the Sunshine Policy shed light on the project's historical significance as a catalyst for trust building, reconciliation and economic integration between North and South Korea (Moon 1999; Kim and Yoon 1999; Koh 200 1; Kim K.S. 2002), while its critics highlight the project's shortcomings in terms of transparency, reciprocity, market principles and financial viability (Tait 2003; Levin and Han 2002). The project's linkage to the process of organizing the historic inter-Korean summit in 2000 further compounded the debate and aggravated the polarization of opinions held by the competing political camps of South Korea. Also on hand was a dispute over whether North Korea had diverted Hyundai's cash remittances for military purposes (Levin and Han 2002; Niksch 2002). Despite the presence of these polarized views, however, the tourism project itself enjoyed strong, steady support by a majority of South Koreans (Cho 2002: 49). Both uncertainty and puzzlement were the inevitable consequences of the Hyundai project that has, in fact, two faces: the benign face of a monumental peace project and the malign face of secret deals, bribery and bankruptcy. This duality led to the dilemma faced by both the policymakers and the general public in South Korea, since it was not easy to determine who should shoulder the financial burden to sustain the money-losing project and to what extent the project had contributed to inter-Korean I For further information. see Kim and Yoon (1999) and Ko (2002). 224 rapprochement. Since inter-Korean relations have undergone momentous changes after the historic summit in 2000, it is virtually impossible to come up with a complete balance sheet regarding the project, if a balance sheet is meant to reflect both the cost­ and-benefit calculations in the short term and its long-term contributions to tension reduction and the creation of a harmonized national community. The reason why its long-term contributions to national reconciliation matter is that the Hyundai project, inaugurated as a scheme by a private company, has become a semi-public project in which a state-run organization is in partnership with Hyundai and taxpayers' money has been earmarked to maintain it. Even though new President Roh Moo-hyun expressed his personal support of the project, its prospects are uncertain, since the project has been steered by various actors with different ideas and identities. This chapter identifies the major actors, involved in this project, and sheds light on the interactions of these actors with different motivations and priorities. The ultimate aim of this chapter is to elucidate what prompted Hyundai to initiate the tourism project and to what extent it has contributed to the shift of South Koreans' identities vis-a-vis North Korea, the alleviation of cross-border tension, the realization of the first-ever inter-Korean summit meeting, and the promotion of inter-Korean economic integration. Therefore, this chapter will not only investigate Hyundai's tourism project, but also probe its relationship with major political and military incidents, such as the inter­ Korean summit and the naval skirmishes in the West Sea in 1999 and 2002, in order to draw a complete picture of the project and its linkage to the Sunshine Policy. In sum, this chapter will demonstrate that South Koreans' collective identity shifts vis-a-vis North Korea, orchestrated jointly by the Kim administration and the top Hyundai management, and the maintenance of the political status quo by means of deterrence, renunciation of sanctions, and political dialogue, enabled South Korea to proceed on the path of economic engagement with North Korea. This chapter will first offer a brief background of the tourism project and then test the three levels of comprehensive engagement, conceived in Chapter Three, against the milestone events of the Kim administration. First, it will outline the identity shifts of the South Korean leadership and general public vis-a-vis North Korea, which made the Mt. Kumgang project set sail and maintain its course despite the rough sea. Second, it will investigate military and political incidents, such as the West Sea naval skirmishes in 1999 and 2002 and the inter-Korean summit in 2000, to stress the Kim administration's efforts to maintain the political status quo on the Korean Peninsula. Third, it will examine Hyundai's investment in North Korea and its connection to the inter-Korean summit and economic integration. On the basis of these analyses, this chapter will 225 conclude with an assessment of how Hyundai's business schemes and President Kim's engagement strategies has contributed to inter-Korean institutionalization and federalization in a dialectic manner. 2. Background Soon after South Korea was hard hit by an unprecedented financial crisis in East Asia, which started with the collapse of the Thai Baht in July 1997, President Kim took office in February 1998 with the prime mission of rescuing the state from acute economic troubles. From the outset, the Kim government faced inherent limitations in pursuing economic engagement with North Korea because of the 'constraints of limited economic resources' (Lee J.S. 2001). Nevertheless, the administration paved the way for the improvement of inter-Korean relations by revising the previous administration's North Korea policies, which were hampering civilian interactions. Citing the principle of the separation of economics from politics, the Kim government adopted its first major measures on 30 April 1998 to stimulate inter-Korean economic cooperation by lifting a ceiling on South Koreans' investment in North Korea and simplifying the process of trips taken by civilians to the North (Chung S.H. 2001: 29). These steps were taken soon after the collapse of the inter-Korean talks in Beijing where negotiators from the two Koreas clashed over the terms for the provision of fertilizer and the exchange of separated family members. As part of efforts to alleviate North Korea's scepticism about the nature of the Sunshine Policy, President Kim needed to introduce these conciliatory measures (ibid). Given the private sector's rising demands for more room to manoeuvre in inter-Korean business transactions, it was not easy for the government to dictate the terms of non-governmental interactions with North Korea (Park K.Y. 1999: 61). Meanwhile, Hyundai's founder Chung Ju-yung, who had arguably built 'one of the most risk-taking chaebols' in South Korea (Lee G 2001: 8), had visited Pyongyang as early as January 1989 and signed a contract with North Korean President Kim II-sung on the joint development of the Mt. Kumgang area. North Korea's attention to the project dates back to 1981 when the late North Korean leader first mentioned the necessity of developing Mt. Kumgang as a major tourist attraction for foreigners during his inspection tour of the resort area (Ko 2002). Kim's attention to the tourism project stemmed from his idea of developing North Korea's scenic landscape to earn hard currency, as Cuba did by opening its attractions to foreign tourists (ibid). North Korea established the Kumgangsan International Tourism Company in January 1988, but its independent scheme failed to attract a large number of foreign tourists to the Mt. Kumgang resort (KNTO 2(01). Despite its fear that Hyundai's Mt. Kumgang project 226 might become a Trojan horse, North Korea had shown deep interest in the Hyundai project, since it could earn hard currency with a limited opening of the Mt. Kumgang area to South Korean and foreign tourists despite its poor tourism infrastructure. Nevertheless, the project made no progress in an adverse international and domestic environment for the next ten years. 2 With the inception of President Kim's Sunshine Policy, Chung's vision came closer to realization. He travelled to North Korea on 16 June 1988 via the truce village of Panmunjom with a convoy of trucks carrying 500 cows. The donation of these 500 cows and 50 trucks was one of Hyundai's preparatory steps to win the hearts of North Korean policymakers before securing their authorization for the Mt. Kumgang tourism project (Chung YS. 1999). In October 1998, Hyundai 3 and its North Korean business partner, the Korean Asia-Pacific Peace Committee (KAPPC), signed a contract on the tourism project, which enabled the first South Korean pleasure boat to leave for the North Korean resort on 18 November. In return for its exclusive rights to operate the tour programme, Hyundai promised to pay US$942 million to North Korea in monthly instalments until 2005.4 The terms of the contract were nonsensical from a business standpoint since Hyundai promised to pay $300 per person as an entrance fee and remit $942 million by 2005 no matter how many people travelled to the mountain resort (Lee J.S.