A Very Expensive Affair

Can the world contain Kim Jong Il if South Korea keeps propping up his Stalinist regime with aid and industrialization projects? The question may rapidly become moot. South Korean President Roh Moo Hyun says he will push ahead with engagement. But the North’s refusal to halt its nuclear-weapons program has made funding the North a hard sell in Seoul—and it’s all the harder due to a scandal over allegations that the government secretly funneled millions of public dollars to the North through Hyundai Asan Corp.

Another “Sunshine Policy” setback: groundbreaking for the planned $2.3 billion Kaesong industrial park, a showpiece of North-South cooperation, has been indefinitely postponed. “After investing such a huge amount of money and moving in hundreds of businesses, what if they are ruined?” says Gong Chang Doo, a director for Korea Land, the state-run company overseeing the project. South Koreans increasingly consider helping the North to be throwing good money after bad. Here’s the price of peace so far:

• DONATIONS Seoul has sent food, fertilizer and other aid worth $1.2 billion over the past five years, according to South Korea’s Unification Ministry.

• TOURISM That includes $400 million that Hyundai Asan sank into a tourism project at Mount Kumgang, which received busloads of visitors over a new overland route through the Demilitarized Zone (DMZ) last month. Hyundai Asan nearly went bankrupt developing the project, and the government agreed to subsidize the cost of Mount Kumgang trips. The company also spent $140 million building hotels and other facilities at the site and is now seeking $1.9 billion more from investors.

• INDUSTRY The Kaesong special economic zone, including an industrial park, tourist facilities and a housing project, could be the South’s most expensive bid to coax the North out of isolation. Its estimated price tag of $2.3 billion doesn’t include an essential power plant and communications infrastructure. Korea Land is raising the first $173 million. It’s hoped the rest will come from banks, investors—and taxpayers.

• TRANSPORTATION A new railroad connecting Munsan in South Korea to the middle of the DMZ cost $79 million. The South is lending earth-moving equipment to the North, which hasn’t finished its section of the rail link yet.

• CASH PAYMENTS Hyundai Asan chairman Chung Mong Hun, one of the heirs to the Hyundai empire, admitted earlier this year that his company secretly sent $500 million to North Korea to win business concessions (including the Kaesong project), money that may have helped clear the way for a landmark June 2000 summit between the leaders of North and South Korea. Hyundai borrowed $194 million of the $500 million payment from a government-controlled bank, but it has never clarified where the rest of the cash came from. Lawmakers from the opposition Grand National Party charge that the entire sum was siphoned from public coffers. Former President Kim Dae Jung denies the summit was paid for. But last week, Roh approved the appointment of a special counsel to investigate.