Korean firms warm to cross-border trade

Korean firms warm to cross-border trade

By Ahn Mi-Young

SEOUL (DPA): North and South Korea may still technically be at
war, but this has not stopped legions of companies from
conducting a brisk and growing trade across the chilly political
divide.

While hostile armies of more than one million troops each have
continued their face-off across the 38th parallel ever since the
1953 truce, small traders and multinational firms have ignored
the politics and got down to business.

The two Koreas have still not signed a peace treaty, but
bilateral trade has grown to an accumulated US$1.44 billion since
the first tentative links were formed in 1988, according to the
South Korean Ministry of National Unification.

Since then, capitalist South Korea has become communist North
Korea's third-largest trading partner, after China and Japan.
Even as the two countries exchanged harsh words over an alleged
North Korean armed submarine crew captured and killed in the
South, trade increased by more than a quarter between the first
seven months of 1996 and the corresponding period this year, to
more than $182 million.

In 1988, the first small and medium-sized South Korean
manufacturers established trade links with the North after Seoul
publicly pledged tolerance of low-profile trade with Pyongyang.
Since then, corporate giants like Daewoo, Samsung and Hyundai
have joined the fray and now make up 80 percent of inter-Korean
trade.

Many of the early deals were arranged by middlemen from Hong
Kong, China and Japan. But since then "South Korean businessmen
have opened various channels of connection with North Korea,"
said an expert.

North Korea's major drawcard remains its cheap but skilled
labor. Workers in one of the world's last remaining communist
dictatorships are paid as little as $80 per month, compared to
between $65 and $230 in China.

Typically, southern firms send raw materials to northern
garment factories, or electronic components to assembly plants.
The finished products are then shipped back from North Korea's
western Nampo port to Inchon in the South by chartered third-
country vessels.

"We are content with production skills at our North Korean
factories," said one southern garment maker. "North Korean-made
products are favorably received by South Korean consumers,
especially in the middle-to-low end segment."

Between April and June this year, 77 vessels carrying more
than 100,000 tons of North Korean-made goods -- mostly textiles,
garments and metal products -- arrived in southern ports,
according to Seoul trade figures. In the same three-month-period,
27 ships carrying some 75,000 tons of goods traveled the other
way.

Almost a decade after it started, cross-border trade may soon
increase substantially.

Since August, hundreds of engineers have started work on the
KEDO project to build two light nuclear reactors at Shinpo in
North Korea.

By the year 2000, up to 1,000 South Korean engineers will
supervise 7,000 North Korean workers there, according to the
southern state utility Korea Electric Power Corp (KEPCO).

Currently, Daewoo is the only South Korean company that runs
its own factory in Pyongyang, but this also may change soon.
Earlier this year, the Electronic Industry Association of Korea
sent a fact-finding mission to North Korea.

Seoul has also given the go-ahead to five companies to do
business with North Korea -- including the state-owned Korea Land
Corporation, LG Corp., Samchully Bicycle and Daesang Super
Express.

North Korea claims that more than 300 companies already
operate in its "free trade zone" at Rajin and Sunbong, with most
investment coming from Koreans living in Japan, China and the
United States.

Samsung, too, wants to set up shop in Rajin or Sunbong and
open a telecommunications center. And the Korea Land Cooperation
even plans a large pilot industrial estate on the site.

A South Korean official hinted Seoul is keen to make money
from its northern cousins, even while the icy ideological battle
continues and the DMZ (Demilitarized Zone) remains an ugly scar
across the Korean peninsula.

"Given the strategic value of inter-Korean exchanges, we would
take a case-by-case flexible approach," he said diplomatically.
An industrial insider put it more bluntly. "Business is
business," he said. "Politics should be cut out of it."