Korea's Peace Motors readies opening

By JONG-HEON LEE, UPI Business Correspondent  |  April 2, 2002 at 10:47 AM
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SEOUL, April 1 (UPI) -- South Korea's Pyeonghwa Motors hopes to build peace along with automobiles on the divided peninsula through a joint venture with North Korea it says will help both nations become better off.

The automotive arm of the Rev. Sun Myung Moon's Unification Church is to open a $55 million car assembly plant on Friday in the North's western port city of Nampo, 25 miles west of the capital of Pyongyang. It is the first heavy manufacturing plant built by an inter-Korean joint venture and the biggest manufacturing investment so far in the impoverished North.

The assembly plant will be capable of rolling out up to 20,000 cars annually, which would run on the empty roads of a country with 23 million people, said Park Sang-kwon, president of Pyeonghwa -- or Peace -- Motors Corp. North Korea has only about 3,000 passenger cars, most of which come from Japan.

"Our ground-breaking investment for the North's auto industry will bring about more foreign capital investments there, which will help North Koreans understand capitalism," Park said in an interview with United Press International.

"If North Koreans can reap the benefits of capitalism though the joint venture, they would seek more capitalist solutions to revive the country's crippled economy," he said.

He said booming joint ventures with capitalist businesses eventually may reduce tension on the peninsula, which remains in a state of technical war since the 1950-53 Korean War ended without a peace treaty.

"Our investment is not only for economic benefits but also for peace promotion on the Korean peninsula," Park said, stressing peace is necessary to doing business in both Koreas.

As part of such efforts, the company plans to build a "World Peace Center" in Pyongyang in which North Koreans would be educated about foreign culture and a market economy, he said. In addition, the auto company plans to open a department store, gas stations and auto showrooms.

Hundreds of South Korean and Japanese technicians have joined with 200 North Korean workers to build the Pyeonghwa Motors Complex Factory, with construction materials entirely South Korean-made, Park said. "I witnessed a small-sized inter-Korean unification among auto workers," he said.

The car plant will begin assembling 10,000 Sienas -- a compact designed by Italy's Fiat SpA -- annually for domestic sales. Sales are expected to reach 3,000 units a year as the North Korean government has pledged to buy 1,000 cars each year, Park said. The vehicles will be sold mostly to foreigners stationed in the North, such as embassy staffers, and will be exported to bordering countries, such as China and Russia and South Korea within several years.

Some auto analysts doubt the company's claims that the project is economically viable, saying 20,000 units is very small for an auto plant.

"At least 250,000 cars are necessary for an auto plant to be profitable considering the need for economies of scale in the auto industry," said Kim Joon-kyu, a senior analyst at the Seoul-based Korea Automobile Manufacturers Association.

Another analyst said the establishment of an automobile factory in famine-stricken North Korea was an "improbable business plan."

But Park dismissed the concerns, saying low labor costs would allow his company to turn out products more cheaply.

"There are no labor unions and labor costs are low. The workers are well disciplined, clever and very quick to learn," he said. The auto plant also has geographical advantages because it is situated next to a new 10-lane highway linking Nampo with Pyongyang.

"The orders of 1,000 cars from the North Korean government alone would be enough for the company to break even," Park said, adding, "We are bound to succeed."

KAMA's Kim said if the North Korean government purchases Pyeonghwa cars at higher than market prices, just as China is doing, the company could avoid losses.

The church-owned carmaker began the auto project in 1999 when it concluded an agreement with North Korea's state-run Ryongbong Corp. Pyeonghwa holds a 70 percent stake for material investment, while Ryongbong owns the other 30 percent for offering land and labor.

Pyeonghwa has imported used Japanese cars into North Korea and refurbished them for resale. It has been selling 20 to 30 cars a month, at $10,000 to $15,000, company officials said.

The car factory is part of the Unification Church's campaign in North Korea launched in 1991 when Moon met with the country's founding leader, Kim Il Sung, to discuss business projects.

Kim died in 1994, but his son and successor Kim Jong Il has maintained ties with Moon. In 2000, Kim sent rare wild ginseng to Moon in a show of friendship. Kim Yong Sun, who handles inter-Korean relations as a confidant of the North Korean leader, attended the groundbreaking ceremony of the Pyeonghwa's auto plant in February 2000.

Government officials said Pyeonghwa's auto project would provide momentum to vitalize sluggish inter-Korean economic cooperation and a stalled reconciliation process.

"We have approved the project in hopes that it would expand inter-Korean cooperation," said an official at the Unification Ministry, which orchestrates Seoul's North Korea policy.

Kim Yeon-chul, a researcher at private Samsung Economic Research Institute, said the joint venture also was expected to help improve North Korea's economy through technology transfers from the South.

Park said he sees a burgeoning market in the communist North and added the company would develop its own model for the North Koreans in the near future.

"North Korea could be a profitable market," Park said. "Many of the businessmen seeking inroads in North Korea have no motives other than just economic profit. They are only thinking of money. But we have a philosophy in doing business in the North -- for the promotion of peace and unification. We will show the North Koreans brotherly love through this project."

UPI is owned by News World Communications Inc., a media company founded by the Rev. Sun Myung Moon.

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