It is untimely for heads of the nation’s global business groups to accompany President Moon Jae-in to Pyongyang for his summit with North Korean leader Kim Jong-un.
Cheong Wa Dae reportedly asked leaders of the top four conglomerates to go along with Moon. Samsung Electronics Vice Chairman Lee Jae-yong, SK Group Chairman Chey Tae-won, Hyundai Motor Group Vice Chairman Kim Yong-hwan and LG Group Chairman Koo Kwang-mo will join him on his trip. His entourage will also include Hyundai Group Chairwoman Hyun Jeong-eun and Posco Chairman Choi Jeong-woo.
It is understandable for the Moon administration to try to expand inter-Korean exchanges. Brisk exchanges with a denuclearized North Korea will pave the way for the unification of Korea and give the Korean economy an unprecedented boost. A new world of business opportunities will open up.
But right now Korea is in a state where the North has not given up on its nuclear arsenal and strong UN sanctions are maintained.
It is an ill-advised move to rush economic projects with the North in this situation.
Also, inter-Korean joint projects will likely undermine international efforts to denuclearize North Korea and have negative effects on South Korean companies involved in such projects.
Moon has sought to revive exchanges with the North, but Washington looks at such moves with concern, citing the lack of progress in denuclearizing the country.
It is better to postpone economic projects involving the North until after negotiations to remove its nuclear program make substantial progress.
The US has imposed sanctions on companies found to have violated the UN sanctions on trade with North Korea. Companies all over the world shun doing business with the communist state.
Above all, investment in the North is fraught with risks and uncertainty.
It is not a country where companies can do business freely. Companies may forfeit their assets, as seen in the shutdown of the Kaesong industrial park. Business projects may stall abruptly, as seen in the suspension of the Kumgangsan tours.
From a business or investment point of view, North Korea is a must-avoid market -- except for its cheap labor. It is doubtful whether a genuine market exists in the country.
Any benefits that South Korean companies could hope to gain from doing business in the North would stem from its labor force -- from making low-end products to bring back home or export to third countries. But right now, doing so would go against UN sanctions.
Even if exceptions were to be made, allowing trade with the North in certain cases, inter-Korean trade would be less suitable for global business groups.
The combined sales of Samsung, Hyundai Motors, SK and LG Groups amounted to 700 trillion won ($62.5 trillion) last year. The gross domestic product of North Korea last year was estimated by the Bank of Korea to be around 30 trillion won. These groups seek to increase profits from high-end, high-tech sectors. There are few justifications for investment.
It is hard to see a future in a country where people exclaim “great leader” to a merciless dictator. What benefits can leaders of global business groups expect from investing in the country?
If they say they are going to Pyongyang because they are attracted to promising business opportunities, few will believe them.
Rather, their image as global businesses will be tarnished if they are punished for violating UN sanctions while trying to trade with the North.
If they agree to invest there, they will likely face a double bind when they return home.
Prudence is warranted in pushing inter-Korean economic projects. Cheong Wa Dae must not press them into business projects with the North.
The Moon administration must try harder to persuade Pyongyang to take meaningful steps to dismantle its nuclear arsenal. If Moon hears Kim say he will declare the list of nuclear facilities and permit international inspections, his summit with Kim will be positively evaluated.
