Crossing boundaries: prospects and challenges for DPRK tourism
Tim Beal
School of Marketing and International Business
Victoria University of Wellington, New Zealand
Email::Tim.Beal@vuw.ac.nz
URL: http://www.vuw.ac.nz/~caplabtb/beal.html
Paper presented at the forum
New Economic Policies of DPRK (North Korea), and Reconciliation Strategies between DPRK and USA ,
Brookings Institution, Washington, D.C., 7-8 June 2001
ABSTRACT
With concern mounting about the faltering Hyundai Asan Kumgangsan tourism venture with losses of US$400 million it is timely to examine the problems and prospects for the development of DPRK tourism
Tourism is a major global industry, so much so that many countries calculate Tourism Satellite Accounts as a special component of their national accounts. In 2000 world tourism grew by 7.4%, reaching 698 million international arrivals and tourism receipts rose 4.5% to US$476billion. East Asia and the Pacific continued to be the fastest growing region with a growth rate of 14.5%. Chinese tourism grew 15.5% to 31 million arrivals and South Korea grew nearly as fast, with a rate of 14.%, attracting 5.3 million international tourists. Tourism has been a significant source of foreign exchange earnings for South Korea and for many other countries around the world.
Whilst the DPRK has made efforts to stimulate inbound tourism, of which the agreements with Hyundai Asan have been the major, but not the only, example
its tourism number and receipts are very small. In 1998, for instance, just 130,000 foreigners visited (most being South Koreans).
The DPRK has sent mixed signals about tourism, It appears to have been inflexible in its dealings with Hyundai Asan, both in terms of fees and opening of land routes (though recent reports suggest a compromise). On the other hand, Kim Jong Il surprised observers by sending a delegation to commemorate the death of Hyundai founder Chung Ju-yung. It has been a member of the World Tourism Organization since 1987 and in marking World Tourism Day on September 2000, Rodong Sinmun said 'The DPRK is taking an active part in the international tourist activities and making strenuous efforts to develop tourism'. A task force from the Pacific Asia Travel Association has been invited to advise on tourism development strategies.
This paper will attempt to identify the potential for tourism development in the DPRK by looking at contemporary data on international tourism through the world, in Northeast Asia and specifically in the Republic of Korea. It situates this within the international and domestic political environment and argues that if the present political problems can be resolved to a sufficient degree, international tourism offers potential foreign exchange earnings that could transform the DPRK economy and set in on the path to recovery and development.
Introduction
The subject of international inbound tourism to the DPRK is wrapped in paradox and wreathed in obscurity. Although in one sense an industrial economy,[1] with substantial mineral resources and educated but cheap workforce, tourism probably accounts for as great a share of foreign exchange earnings as it does for the tourist islands of the Caribbean. The Bahamas, for instance, where industry accounts for a mere 5% of GDP, direct spending by tourists ('visitor exports') is 75% of export earnings.[2] Tourism is a product of peace, but the DPRK is still technically in a state of war with the ROK, it major current sources of tourists) and with United States, and diplomatic relations have yet to be established with Japan, the two countries that provide the bulk of tourists to the South.. The DPRK probably has one of the most negative images of any tourism destination in the world and yet derives substantial earnings from inbound tourism. Although it undoubtedly has a very small share on international tourist arrives, much smaller than the ROK, it has great tourism potential.
Map
1: Kumgangsan
Source: Hyundai-Asan website
Data on DPRK tourism is nearly as scarce as data on any other aspect of its economy and, as with other international transactions such as trade, most of it comes from outside. In the case of tourism this is simplified to a large degree in that most of the current inbound tourism is controlled by one company, Hyundai Asan, and goes to one destination, Kumgangsan.[3] However, whilst Kumgangsan is currently the major component of DPRK tourism, and even in the best of circumstances is likely to remain an important component, the real development of the tourism industry, if it is to happen, will take place on a much wider canvas, involving more of the country. If DPRK tourism is really to develop and achieve anything like its true potential then it will need to become like a 'normal' tourism industry. International experience, and especially that of countries with similarities in various ways to the DPRK - ROK, China, Vietnam and Cuba - can throw light on the opportunities and challenges it will face. This paper uses data from the international tourism industry to situate DPRK tourism within a standard economic framework. For convenience, most statistics are relegated to the Statistical Appendix, with only highlights brought into the main text.
The Politics of DPRK tourism
The development of DPRK tourism, and the economy as a whole, is clearly contingent on the geo-political environment and, most crucially, on DPRK relations with ROK and the United States. In turn, it is clear at the time of writing, that this hinges primarily on the policies of the Bush administration. To use a phrase which currently has wide currency, 'the ball is in the US court'.[4] Though still small by international standards, inter-Korean tourism, or more precisely tourism from South to North, has increased remarkably since 1998.[5] However, if that is to continue and to develop, and if DPRK tourism is to expand its intake beyond Korea then the political situation must move forward from the present impasse towards normalisation. That is, of course, a necessary condition but not a sufficient one. However, if the political framework can be established then the development of tourism, however difficult, can be achieved. Other countries have built up a tourism industry once peace has been established, including ROK.[6]
The importance of US policy, even in respect to the Kumgangsan venture, which is virtually entirely a Korean affair, was highlighted in a recent article by the Korean Central New Agency (KCNA) in Pyongyang attacking the Unites States for 'hampering Mt. Kumgang tour.' [7] The article rebutted claims that the income from the venture was being used exclusively for military purposes. Whether the US has really been putting pressure on the ROK government, and Hyundai Asan as alleged, is unclear and there do not seem to have been any southern reports corroborating that.
Even if US-DPRK relations improve, the memory of 50 years of hostility will linger on in popular consciousness and make if difficult to develop a positive image of DPRK as a tourism destination. Country image, of course, is a key component in tourism choice.[8] 'Political stability' is but one aspect of this. [9]
There is a dreadful dilemma in the case of the DPRK, and other similar afflicted societies. Tourism offers a powerful contribution to the relief of the current humanitarian crisis, and to long-term development, but tourists tend to avoid, for moral and practical reasons, going to famine-ridden countries. Koryo Tours, a British tour company based in Beijing specialising in travel to the DPRK frankly addresses this issue on its website.[10]
It would be foolish to minimise the problems of the DPRK's foreign political relations, nor the difficulties of its internal political-economy, which are inter-related. The current economic situation, with its shortages especially of electricity, are scarcely conducive to the development of tourism. However, it is also important to look beyond that at potential for tourism income revealed elsewhere in the world. To get from A to B may be extremely difficult, perhaps impossible, but it is important to ascertain how worthwhile getting to B is.
Contemporary International tourism
International tourism is already a major component of the global economy, and may well become even more important in the future if present widespread, albeit uneven, trends towards greater disposable income and longer holidays, combined with falling real transportation costs, continue.
Table
1 : Economic impact of tourism, selected countries
|
Country |
% of GDP |
% of workforce |
|
Australia |
4.5 |
5.4 |
|
Canada |
2.4 |
3.5 |
|
Chile |
3.8 |
3.2 |
|
New Zealand |
3.4 |
4.1 |
|
United States |
2.2 |
3.5 |
Source: World Tourism Organization, 'TSAs - Revolutionizing the View of the Tourism Industry', Press release, 10 May 2001 (note this includes both domestic and international tourism)
World
tourism: arrivals and desinations
World tourism grew by an estimated 7.4 per cent in 2000, with 698 million international arrivals and receipts from international tourism of US$476 billion.[11] Europe, not surprisingly given its combination of wealth and multiplicity of countries, captured by far the largest share, 57% or 403 million arrivals.
Fig
1: International tourism arrivals, 2000, regional shares
Source: Statistical Abstract Table A9
Growth in number of arrivals is only one part of the story, but it is an important indicator. By this measure East Asia and the Pacific grew at twice the world average (14.5% against 7.4%) between 1999 and 2000. (Fig2)
Fig
2: Growth in international arrivals by region, 1999-2000
Source: Statistical Abstract Table A9
European countries captured most of the top places in 2000, although China was 5th with 31.2 million arrivals. If Hong Kong's 11.3 millions arrivals were added to China's, that would have brought China close to challenging Spain for third position. The Republic of Korea did not make the top 15, but nevertheless held a strong position within the East Asian context.
Fig
3: Top international tourism destinations, and ROK, 2000
Source: Statistical Abstract Table A10
Within the Asia/Pacific region (East and Southeast Asia plus Oceania) China, and its gateway cities Hong Kong and Macau, naturally occupy the first position, with 51 million arrivals in 2000, just over half of the total for the top ten Asia/Pacific destinations. Following China comes Southeast Asia, with Malaysia, Thailand having roughly 10 million each, Singapore with 7 million and Indonesia with 5 million.
Fig
4: Top international tourism destinations in Asia/Pacific, 2000
Source: Statistical Abstract Table A11
In Northeast Asia the Republic of Korea just outstripped Japan, with 5.3 million arrivals compared with 4.8 million. In terms of growth 1999-2000, ROK did twice as well as Japan, 14.5% against 7.2%, nearly equalling China's 15.5%.[12]
Does this mean that ROK is a more attractive destination for international tourists than Japan and, by implication, does this reveal potential for DPRK? The answer to this question is complicated by the imbalance between inbound and outbound tourism in East Asia and the calculation that, in turn, is made more difficult by the particular relationship between China, Hong Kong and Macau.
As Fig 5 shows, Japan is a huge generator of outbound tourism, which greatly surpasses its inbound tourism. Taiwan also has quite a substantial surplus, but most of that is directed to Hong Kong, Macau and China (55% in 1999) and Southeast Asia (22%). In 1999 on 1.3% of Taiwanese outbound tourists went to ROK.[13]
Fig
5: Inbound and outbound tourism in Northeast Asia, 1999
Source: Statistical Appendix Table A12
Taiwanese tourism preferences are to a large degree explained by ethnicity; they tend to go to 'Chinese areas' either visiting friends and relatives or because of cultural and linguistic comfort. Japan has no such 'Diaspora pull'. As Fig 6 shows, Japanese outbound tourism is fairly evenly distributed and is somewhat impervious to distance. Japanese are more likely to go across the Pacific to North America than to their own neighbourhood, Northeast Asia. They are more likely to go to far-off Europe than to relatively close Southeast Asia. Most curiously, during the period 1995-99, North America took not merely the largest share of Japanese outbound tourism (27.7%) but its growth rate was four times the average (25.7).[14] This was despite the appreciation of the US$ and the Asian financial crisis with its depreciation of most Asian currencies.
Fig
6: Japanese outbound tourism, 1995-99, by sub-region
Source: Statistical Abstract Table A14
This suggests that the direction of Japanese outbound tourism is relatively little constrained by uncontrollable factors, such as cost, travelling time and ethnicity, and is more malleable by marketing.
Within Northeast Asia China (including Hong Kong and Macau) occupies the major share - over half of Japanese tourism to the region 1995-99 - but growth was stagnant, showing -1% decline over the period. Taiwan fared worse, with a decline of 10%. Mongolia had a 31% increase, but the numbers were very small, just 0.2% of the total to the sub-region. No Japanese tourists to DPRK are shown in the World Tourism Organization data, though this may be a matter of reporting rather than reality. However, the star performer was the Republic of Korea, which captured 30% of the total, greater than either China or Hong Kong individually, and turned in a growth over the period of 31%. To what degree this growth can be sustained, and what potential this indicates for the DPRK is a matter of conjecture. [15] However, the ROK's success in the Japanese tourism market offers a beacon of hope for the DPRK. Given favourable political and industry developments it suggests that there is opportunity for the DPRK to attract Japanese tourists. This would not be so likely if 'Korea' as a geographical area were decreasing in popularity.
Fig
7: Japanese tourism to Northeast Asia, 1995-9, share and growth
Source: Statistical Appendix Table A15
It was said above that Japanese outbound tourism was not affected by ethnic pull in the sense that Taiwanese was. This is not completely true because of the substantial numbers of Japanese-Koreans. According to Korean sources, in the late 1990s there were some 660,000 Japanese-Koreans.[16] How many were pure Korean (mixed Japanese-Korean marriages now outnumber inter-Korean marriages), and how many preserved their language and culture to the extent that they saw Korea a 'home' is uncertain. Similarly what links with relatives on the peninsula remained is unclear. Certainly the World Tourism Data does not give any indication of the ethnic background of Japanese outbound tourists. However, it is likely to be quite an important factor and needs more detailed examination.
However, Japan is only one part of the Korean Diaspora and, as Fig 8 shows, it has quite a small share (12%) of the 5.6 million Koreans who by one estimate live outside Korea.[17]
Fig 8:
The Distribution of the Korean Diaspora, 1999
Source: Statistical Abstract Table A16
The connection between the distribution of the Korean Diaspora and the provenance of inbound tourism to the ROK is impossible to determine with the available data. However, the surprisingly high number of tourists coming from China and the Commonwealth of Independent States (CIS) does suggest that a substantial proportion of tourists to ROK were of Korean ethnicity. Again this has important, but difficult to quantify, implications for potential tourism to the DPRK
Fig
9: ROK inbound tourism and the Diaspora, 1999
Source: Statistical Appendix Table A17
Clearly, ethnicity is only one of many factors influencing tourism to the ROK, and suggesting potential for the DPRK. Distance, cultural affinity, disposable income, holiday availability and host country receptiveness and attractiveness, amongst others, all play a part.
Northeast Asia takes provides far the major share of inbound tourism to the ROK, 61% (2.9million) in 1999 (Fig 10). This share has grown over the years, as has that of Southeast Asia and Central/Eastern Europe, while that of North America has declined.[18]
Fig
10: ROK inbound tourism, 1999, by sub-region
Source: Statistical Appendix Table A19
The changes in share have not been marked however, apart from that of Central and Eastern Europe which has shown huge growth, albeit from tiny beginnings. There was explosive growth in the late 1980s and early 1990s, due presumably to the collapse of the Soviet bloc. It peaked in the mid 1990s and has declined since then. (Fig 11) The implications for the DPRK are interesting. To the degree that the growth was released and fuelled by political liberalisation in Central and Eastern Europe it was a on-off event that cannot be replicated for the DPRK. However, if there were also ethnic factors at work then it may reveal some potential for the DPRK
Fig
11: Inbound tourism to ROK from Central and Eastern Europe, 1985-1999
Source: Statistical Appendix Table A18
The
Tourism Satellite Accounts perspective
Raw tourist numbers, whilst being useful in identifying source countries, and their varying degrees of growth or decline, say little about the economic impact. Tourists may stay one day or many, they may stay with friend and relatives, or in hotels of varying expense, they may spend a lot each day on food, drink, entertainment or gifts, or very little. Much of the evidence for the economic impact of tourism comes from Tourism Satellite Accounts (TSAs). Since tourism, unlike products such as cars, TVs and the like, is an amalgam of a variety of goods and services, its dimensions are not captured by traditional national accounts. the TSA is a statistical tool that measures the total economic and employment impact of tourism, allowing researchers to directly compare the impacts of tourism with those of other industries -and from country to country. Originating in Canada, there has been a worldwide move to creating TSAs around the world over the last 25 years.[19]
TSAs divide the income from tourisms into two components, 'visitor exports', or the money directly earned from tourist whilst visiting, and 'other exports' which covers transportation and other goods and services consumed by tourists.[20] These two components have also been combined in this paper as 'total foreign income' to give a composite figure for the economic benefit derived from international tourism. The data is given by region and by country, and both are used.
As Fig 12 shows, the European Union is by far the largest recipient of direct international tourist expenditure ($237b). North America comes second with $137 billion, followed by Northeast Asia with $51billion.
Fig
12: 'Visitor exports' 2001, by region
Source:
Statistical Appendix Table A1, col 1
In Fig 13, which shows the total foreign income, that is 'visitor exports' plus 'other exports', the ranking is very much the same, except that the Caribbean, which has little in way of 'other exports', slips down the table.
Fig
13: Total income from international tourism, 2001, by region
Source: Statistical Appendix Table A1, col 5
The relationship between 'visitor exports' and 'other exports' is an important, with implications for the DPRK. Fig 14 plots 'other exports' as a percentage of 'total foreign income'. Much of this comes as no surprise. The Caribbean gets little extra income from its tourists; the Middle East (oil) and North America and the European Union (transportation equipment and services, etc) gets nearly as much again offshore as it does onshore. Some of the other rankings are more difficult to explain; Sub-Saharan Africa seems surprisingly high for example. However, However it is interesting to note that Northeast Asia has the highest percentage of all -58%. The region earns more from the offshore component of international tourism than the onshore component. Why this is so is not clear, though as we shall see below, much of it is due to Japan. Whatever the reason, the implications for the DPRK are significant. Some 43% of world tourism expenditure takes place outside the tourism destination and the DPRK needs to consider how it might obtain a share of that.
Fig
14: Offshore share of income from international tourism, 2001
Source: Statistical Appendix Table A1, col 7
Turing to tourism orientation- the total foreign income from tourism as a percentage of exports - we find that predictably the Caribbean heads the list; tourism accounts for 21.3% of its total exports. The world average is 12.9%, and is an indication of how important the international tourism industry is. The Northeast Asia percentage is very low, 8.5%, and second only toe Southeast Asia. This is partly a reflection of the strength of the export sector in Northeast Asia, but it may also be an indication of unrealised potential.
Fig
15: Tourism orientation, by region, 2001
Source: Statistical Appendix Table A1, col 6
The World Travel and Tourism Council has calculated a ten-year projections, giving estimates of the same data for 2011.[21] Linking the two years are growth projections.[22] The WTTC predicts that the Northeast Asia region will perform very well. In terms of visitor exports it predicts an annual growth over the period of 7.2%, making in the third best-performing region after South Asia, which has the smallest share of world tourism income (Fig 13), and Southeast Asia, which in 2001 had about 1/3 of Northeast Asia's earnings. Northeast Asia is big, and predicted to grow strongly
Fig
16: Real growth in visitor exports, 2001-2011, by region
Source: Statistical Appendix Table A3
Northeast Asia is predicted to do even better in terms of other exports, ranking second (again a after South Asia) with an annual rate of 8.3%, considerably above the world average of 6.2%
Fig
17: Real growth in other exports, 2001-2011, by region
Source: Statistical Appendix Table A3
These growth projections indicate a huge amount of growth in total income for international tourism over the next decade. As Fig 18 shows, the European Union will be the principle beneficiary, but Northeast Asia is only slightly behind North America in second place. The WTTC predicts that Northeast Asia will earn an extra $251 billion over this period, 17% of the world total.[23]
Fig
18: Growth in Total Foreign Income from tourism, 2001-2010, by region
Source:
Statistical Abstract Table A3
Predictions are just predictions and are frequently invalidated by subsequent events. Nevertheless, they do indicate considerable scope for countries in Northeast Asia to increase income from foreign tourism. How much the DPRK will be able to participate in this is another matter.
Clearly, even on the most optimistic projections, the DPRK will not be a significant generator of new international tourism, apart of course from the special case of tourism from ROK. Southerners may conceivably visit relatives of home places in the north in addition to holidaying abroad. However, in general it would seem that increase in tourism to the DPRK would take place at the expense of tourism to other places. That mainly means elsewhere in Northeast Asia and specifically ROK. We have seen that the WTTC projections for Northeast Asia are good, with plenty of space for DPRK tourism to expand without having impact on the sub-region as a whole. What about the ROK?
ROK tourism
In 1961 the
Republic of Korea was seen as late developer in international tourism in the
Pacific Asia region. A US Department of
Commerce study published that year noted:
No matter how
it is analysed, tourism in the Republic of Korea is extremely small. In fact, compared with that of its
neighbouring countries, Korea's international tourist business is so small it
suggests the presence of important major obstacles. These would certainly include the attitude of international
travellers toward visiting Korea. For I
stance, an attitude study completed in the United States and Canada (see
chapter I) shows that, out of 19 countries in the Pacific and Far East,
potential travellers rate Korea next to last as a place they want to visit. Korea ranked high in the North American
market as a pace potential tourists considered "unsafe".[24]
That was
relatively soon after the Korea War, and at a time when China was still
invisible to American eyes, and certainly those of tourists.[25] Most crucially, it as way before the Seoul Olympics,
which was a key event
Fig 19: Korean inbound tourism, 1961-2000
Source:
Statistical Appendix Table A20
Today,
tourism is embraced as a key component of ROK's move towards the
'knowledge-based economy'-
........new motifs for economic growth will be developed as the nation advances into a knowledge-based economy.
First, infrastructure of information and telecommunication industries will be established, and new strategic industries of the future, such as culture and tourism, nurtured. In addition, industries in general will be transformed into ones suitable for the knowledge-based economy.[26]
2001 is being promoted as 'Visit Korea year' and Korea's share of the World Cup events in 2002 is forecast to 'create 350,000 Jobs, Boost GNP by 11.4 Trillion Won' [27] Dato' Abdul Kadir, The Malaysian Minister of culture, arts & tourism, on a visit to Korea May/June 2000 described tourism as the mega industry of the future and predicted that Korea, being close to Japan and China, had the potential to become a major tourist destination.[28]
How does ROK, in fact, compare with other countries. Here we look at a selection of countries that might be considered as competitors or benchmarks. Some, such as Cuba and Vietnam have particular relevance to DPRK because of their relationship with the United States.
In terms of total foreign income (Fig 20) ROK might be considered a middle-ranking market. Although less than a tenth of the US level ($18.5b against $196b), its income from international tourism is ahead of that of Taiwan, Macau, Cuba and Vietnam but quite a long way behind Hong Kong, China and Japan. ROK captures a mere 1.7% of the world's tourism expenditure, compared with the US 18.5%. Again, it is behind Japan (4.1%), China (2.8%) and Hong Kong (2.2%) but ahead of Taiwan (0.6%), Macau (0.3%) and Cuba and Vietnam which have 0.2% each.
Fig
20: Total Foreign Income, 2001, ROK and selected countries
Source:
Statistical Abstract Table A5
In terms of Tourism orientation, here measured as total foreign income as a percentage of exports, ROK is again a middle-ranking power, but the line-up is different.
Fig
21 Tourism orientation, selected countries, 2001
Source: Statistical Abstract Table A5
At the top we get traditional tourism-oriented economies such as Macau, Spain and Cuba. The United States occupies a special position because of its strengths in transportation equipment and services. ROK is slightly behind Vietnam and on a par with most of the other Northeast Asian countries, except Taiwan whose tourism-orientation is very low. ROK, and Northeast Asia, is below the world average and this suggests that there is some unrealised potential for tourism industry development. Over-dependence on tourism, such as is the case with Cuba (and the Caribbean generally) is of course to be avoided but ROK does not face that danger.
Fig
22: Changing shares of world tourism income, 2011-2011, ROK and selected
countries
Source: Statistical Appendix Table A5 (col35) and Table A7 (col 47)
The WTTC predicts (fig 22) that ROK will increase its share of world income from international tourism from 1.7% in 2001 to 2.2% in 2011. The shares of the United States and Cuba will fall, Vietnam will stay steady and the others in our selection will all increase. Again this omens well for the DPRK.
It is estimated that the Republic of Korea will be earning $17billion from visitor exports in 2011, plus a further $39billion from 'other exports', giving total earning from international tourism of $56 billion.[29] By then the ROK will rank 22 in terms of visitor exports (down from 19) and 10 in terms of other exports (up from 13). Real growth in visitor exports over the decade 2001-2011 will be 2.6% a year (making ROK 124 in the league table) and other exports will grow at an annual rate of 9.5% (23rd place). In other words, ROK will perform below world average for visitor exports 2.6% against 5%) but above average for other exports (9.5% against 6.2%).[30]
The WTTC projections suggest that ROK annual income from international tourism will grow by $37 billion over this period. What share of this increase the DPRK can capture is an open question but even at the most optimistic it is unlikely to make much dent.
DPRK tourism
Data on
DPRK tourism is virtually non-existent, apart from that to Kumgangsan. No data relating to DPRK was found on the
World Travel and Tourism Council website, and just fragmentary data on the
World Tourism Organization website (see Statistical Appendix Tables A21 and 22)
Map 2: Kumgangsan area
Source:
Hyundai Asan website
Most of the available data related
to the Hyundai Asan Kumgangsan venture, and originates with Hyundai. Apart from that the facts are sketchy. A DPRK tourism official, Kim Ryong Hwan,
managing director of the DPRK travel company, who participated at the ITB
travel fair in Berlin in March is reported as having said that 'just a few hundred European tourists visited North Korea last
year, though a total of 100,000
foreigners, mostly Chinese, had the opportunity to breathe the country's
rarefied air.' He is reported as having said that they expected 1,000 European
visitors in 2001 and that facilities were ready.[31] The '100,000 foreigners, mainly Chinese'
were clearly in addition to the ROK visitors to Kumgangsan. However, a Bank of Korea assessment of the
North Korean economy published in May 2001 is reported as stating 'Hotels and
restaurants, benefiting from a doubling in foreign guests to 50,000 visitors,
expanded 27 percent.'[32] Again this figure would seem to exclude
Kumgangsan (most of whose visitors were not 'foreigners') but is half the level
of Kim Ryong Hwan's
statement.
The ROK Ministry of Unification
website reported
As
of November 30, the number of South Korean visitors to the North this year
reached 6,846 in total, not including the Mt. Kumgang tourists. The number
showed ups and downs in the early 1990's, but constantly grew since 1995. It
increased rapidly after 1998 with the inauguration of the Kim Dae-jung
Administration. During the period from 1998 through the end of November 2000, a total of 15,762 South Koreans visited
the North. During the early days of inter-Korean exchange in
1990
and 1991, the visits were made mostly in the social area. The economic area
quickly became the major one thereafter. The total number of Mt. Kumgang tourists
from 1998 through November 2000 was 360,143.[33]
As for Kumgangsan itself, the Hyundai Asan website claimed 370,000 visitors between the first trips on 18 November 1998 and December 2000.[34] By June 2001 that figure had risen to 407,000. But so had Hyundai's losses. According to the same article they now amounted to about $400 million.[35] Hyundai Asan started defaulting on the $12 million monthly payment in February, paying only $2 and has paid nothing since. By the end of May the debt stood at $46 million.[36] Hyundai has attempted to increase revenues by introducing a floating casino but this has been rejected by the ROK government.[37] In its negotiations with the DPRK it has been asking for a reduction in the monthly fee, and more substantially, the designation of the area as a special economic zone and the opening of a land route from the south to Kumgangsan. At the time of writing it is being suggested that the north will accede to these requests.[38]
Outsiders had always claimed that the Hyundai venture was driven by personal reasons, especially those of founder Chung Ju-yung, and did not make business sense. However, in an interview in Far Eastern Economic Review, Kim Yoon Kyu, president of Hyundai Asan, asserted that this was no so. He said that opportunities in the South were drying up, so that the ventures in the North (of which Kumgangsan is not the only one, albeit currently the biggest) were necessary for future growth. Asked about losses he replied:
Now, yes, our losses are around $40 million or so since the project began two years ago. Over 300,000 South Korean tourists have visited Mount Kumgang so far and with foreigners being allowed to visit from the end of this year, the number could soon reach half a million. We expect to break even next year. Assume, for example, that each tourist spends $1,000 on a trip. That totals $300 million a year. Under our contract, we'd be paying up to $940 million over six years as licence fees. Our revenues over a three-year period alone would be $900 million, sufficient to cover our basic commitment. We plan to build a golf course, an amusement park, hotels and other accommodation to altogether handle up to half a million tourists a year, including foreigners. We want to bring investment from the United States, Europe and Japan for this mammoth project. We'd be selling Cokes and pizza and other capitalist goods there, inside North Korea.[39]
Despite Hyundai's financial woes, 2001 saw a 42.1% increase in cross-border travel. The ROK Ministry of Justice calculated that 475,691 people travelled across the Korean border that year compared to 334,546 from a year earlier. 467,538, or 98.2% were 'Korean nationals' and a mere 8,153, 1.8% were foreigners. It was said that 'South Koreans made up the vast majority' of the Korean nationals most of the others presumably being Japanese Koreans.[40]
Kumgangsan though currently the jewel in crown of DPRK tourism is not the only attraction. Attempts have been made to develop tourism in Rajin-Sonbong targeting Chinese from China and Hong Kong with the lure of gambling.[41] Mt Paektu, the sacred mountain on the Chinese border, is currently hampered by access problems but has long-term prospects.[42] According to a Korean Central News Agency (KCNA) report from Pyongyang, over the last 20 years some 100,000 'overseas Koreans' and 60,000 foreigners have visited Myohyangsan. [43] The ancient capital of Kaesong is scheduled to be opened to tourism, and developed by Hyundai Asan, and if that happens its proximity to Seoul will be a major strength.[44]
Conclusion
It is clear
that there will, in all likelihood, be burgeoning tourism demand in Northeast
Asia over the next decade and beyond.
If the DPRK is able to participate in that, even at a modest level, it
could produce sufficient foreign exchange earnings to transform and
re-invigorate its economy.
Participation in tourism will be contingent on the same factors which
could unleash other forms of foreign income generation, especially joint
venture exports. Tourism and exports,
combined with an influx of FDI and loans from international financial
institutions, could produce a virtuous circle of reinforcing growth.
A benign political environment is a necessary condition for tourism development but it is far from sufficient. Problems range from the general economic situation (and especially shortage of electricity) to establishing a tourism infrastructure, transportation and personnel training. Then comes the marketing of the DPRK as a tourism destination, a formidable task given its present image and fierce competition in the region. No doubt the Pacific Asia Travel Association task force led by Neil Plimmer will produce concrete recommendations on many of these issues.[45]
The impact of tourism on the social and political structure of the DPRK is a contentious issue. North Korea is not alone in facing this challenge, which is common around the world, especially in small previously insulated countries. The resilience of the DPRK has surprised many in the past; it may do so again in respect of tourism.
Statistical appendix
Sources
There are two main international sour of tourism data, the World Travel and Tourism Council (WTTC) and the World Tourism Organization (WTourOrg). In addition national tourism authorities publish data at varying degrees of disaggregation and currency
World
Travel and Tourism Council
Data is sourced from website at http://www.wttc.org/. The following documents have been used here: They are available as pdf files and were downloaded May 2001. The documents are unsatisfactory in that the terms are not succinctly explained (the Overview is too cursory and the documentation files is too detailed) and tables are not clearly numbered. However, the WTTC provides an invaluable, authoritative source of data.
- World Travel & Tourism Council, Year 2000 TSA Research Overview and Definitions
- World Travel & Tourism Council, Year 2001 Tourism Satellite Accounting Research: Northeast Asia
- World Travel & Tourism Council, Year 2001 TSA Research: Country League Tables
- World Travel & Tourism Council, Year 2001 TSA Research: Regional League Table
- World Travel & Tourism Council, Year 2001, Tourism Satellite Accounting Research: World
- World Travel & Tourism Council, Year 2001 TSA Research Tables: World Analysis
- World Travel & Tourism Council, Year 2001 TSA Research Tables : Country Analysis
The WTTC utilises national Tourism Satellite Accounts. This is explained thus:
The Travel & Tourism Satellite Account is based on a "demand-side" concept of economic activity (i.e. the economic activities of visitors and travel companies), because it does not produce or supply a homogenous product or service like traditional industries (agriculture, electronics, steel, etc.). Instead, Travel & Tourism is a collection of products (durables and nondurables, consumer and capital) and services (activities) ranging from airline and cruise ship fares, to accommodations, to restaurant meals, to entertainment, to souvenirs and gifts, to immigration and park services, to recreational vehicles and automobiles, to aircraft manufacturing and resort development. as clothing, electronics or gasoline) or capital goods sent abroad for use by industry service providers (such as aircraft or cruise ships). [46]
The two main series from the international point of view are
Visitor Exports are expenditures by international visitors on goods and services in a resident economy.
Exports (Non-Visitor) which include consumer goods sent abroad for ultimate sale to visitors (such as clothing, electronics or gasoline) or capital goods sent abroad for use by industry service providers (such as aircraft or cruise ships).
The differences between these two components is significant. Briefly non-visitor exports is the amount spent by tourists outside the destination country and includes major expenses such as transportation. For the 'developed world', visitor exports and non-visitor exports are roughly equal, but for the underdeveloped world (eg the Caribbean) non-visitor exports are only about 11% of visitor exports. In other words, some 40% of total international tourism expenditure are lost to the host countries.[47] However, Northeast Asia occupies an unusual position; it is the only region whose non-visitor exports are greater than visitor exports.
Table
A1: Regional Tourism Satellite Accounts 2001
|
|
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
|
|
2001 |
|||||||
|
|
Vis Exp 01 |
Vis Exp % |
Oth Exp 01 |
Oth Exp % |
Tot For Inc |
Tot FI % |
Non_Vis % |
Reg % |
|
|
US$m |
% |
US$m |
% |
US$m |
% |
% |
|
|
Caribbean |
18,153.0 |
19.1 |
2,060.7 |
2.2 |
20,213.7 |
21.3 |
10 |
1.9 |
|
Central and Eastern Europe |
35,709.0 |
10.7 |
11,393.0 |
3.4 |
47,102.0 |
14.1 |
24 |
4.4 |
|
European Union |
233,610.0 |
7.5 |
189,740.0 |
6.1 |
423,350.0 |
13.6 |
45 |
39.8 |
|
Latin America |
18,126.0 |
7.7 |
10,928.0 |
4.6 |
29,054.0 |
12.3 |
38 |
2.7 |
|
Middle East |
13,456.0 |
8.4 |
14,155.0 |
8.9 |
27,611.0 |
17.3 |
51 |
2.6 |
|
North Africa |
10,331.0 |
15.8 |
3,233.6 |
4.9 |
13,564.6 |
20.7 |
24 |
1.3 |
|
North America |
137,010.0 |
8.1 |
126,770.0 |
7.5 |
263,780.0 |
15.6 |
48 |
24.8 |
|
Northeast Asia |
50,780.0 |
3.5 |
73,865.0 |
5 |
124,645.0 |
8.5 |
59 |
11.7 |
|
Oceania |
17,912.8 |
14.8 |
3,224.5 |
2.7 |
21,137.3 |
17.5 |
15 |
2.0 |
|
Other Western Europe |
21,333.0 |
7.7 |
7,446.7 |
2.7 |
28,779.7 |
10.4 |
26 |
2.7 |
|
South Asia |
7,158.5 |
7.5 |
1,982.1 |
2.1 |
9,140.6 |
9.6 |
22 |
0.9 |
|
Southeast Asia |
29,623.0 |
5.6 |
12,877.0 |
2.4 |
42,500.0 |
8 |
30 |
4.0 |
|
Sub-Saharan Africa |
8,664.3 |
7.1 |
3,985.2 |
3.3 |
12,649.5 |
10.4 |
32 |
1.2 |
|
World |
601,730.0 |
7.3 |
462,070.0 |
5.6 |
1,063,800.0 |
12.9 |
43 |
100 |
Notes and sources
|
Bottom row |
World |
|
|
column |
full title |
source |
|
1 |
2001 Visitor exports |
Regional League Table, Table 23 |
|
2 |
2001 Visitor exports as % of total exports |
Regional League Table, Table 24 |
|
3 |
2001 Other exports |
Regional League Table, Table 29 |
|
4 |
2001 Other exports as % of total exports |
Regional League Table, Table 30 |
|
5 |
2001 Total Foreign income |
sum of 1 and 3 |
|
6 |
2001 Total Foreign income as % of exports |
sum of 2 and 4 |
|
7 |
2001 Other exports as % of total foreign income |
3 as % of 5 |
|
8 |
2001 Regional shares of Total Foreign Income |
5 as % of world total |
Table
A2: Regional Tourism Satellite Accounts 2011
|
|
9 |
10 |
11 |
12 |
13 |
14 |
15 |
|
|
Vis Exp |
Vis Exp % |
Oth Exp |
Oth Exp % |
Tot For Inc |
Tot FI % |
Reg % |
|
|
US$m |
% |
US$m |
% |
US$m |
% |
% |
|
Caribbean |
37,633.0 |
17.0 |
5,300.4 |
2.4 |
42,933.4 |
19.4 |
1.7 |
|
Central and Eastern Europe |
74,840.0 |
13.6 |
17,657.0 |
3.2 |
92,497.0 |
16.8 |
3.6 |
|
European Union |
542,850.0 |
6.7 |
539,880.0 |
6.7 |
1,082,730.0 |
13.4 |
41.9 |
|
Latin America |
34,443.0 |
6.2 |
29,248.0 |
5.3 |
63,691.0 |
11.5 |
2.5 |
|
Middle East |
23,958.0 |
9.2 |
21,327.0 |
8.2 |
45,285.0 |
17.4 |
1.8 |
|
North Africa |
18,311.0 |
16.4 |
5,364.5 |
4.8 |
23,675.5 |
21.2 |
0.9 |
|
North America |
275,480.0 |
7.7 |
275,380.0 |
7.7 |
550,860.0 |
15.4 |
21.3 |
|
Northeast Asia |
138,165.0 |
3.0 |
237,870.0 |
5.2 |
376,035.0 |
8.2 |
14.6 |
|
Oceania |
40,087.6 |
14.3 |
7,547.4 |
2.7 |
47,635.0 |
17.0 |
1.8 |
|
Other Western Europe |
49,913.0 |
9.5 |
12,902.0 |
2.4 |
62,815.0 |
11.9 |
2.4 |
|
South Asia |
31,646.0 |
8.3 |
6,174.7 |
1.6 |
37,820.7 |
9.9 |
1.5 |
|
Southeast Asia |
96,511.0 |
7.3 |
33,724.0 |
2.5 |
130,235.0 |
9.8 |
5.0 |
|
Sub-Saharan Africa |
18,618.0 |
7.4 |
7,963.0 |
3.2 |
26,581.0 |
10.6 |
1.0 |
|
World |
1,382,180.0 |
6.7 |
1,201,100.0 |
5.8 |
2,583,280.0 |
12.5 |
100.0 |
Notes and sources
|
Bottom row |
World |
|
|
column |
full title |
source |
|
9 |
2011 Visitor exports |
Regional League Table, Table 26 |
|
10 |
2011 Visitor exports as % of total exports |
Regional League Table, Table 27 |
|
11 |
2011 Other exports |
Regional League Table, Table 32 |
|
12 |
2011 Other exports as % of total exports |
Regional League Table, Table 33 |
|
13 |
2011: Total Foreign income |
sum of 9 and 11 |
|
14 |
2011: Total Foreign income as % of exports |
sum of 10 and 12 |
|
15 |
2011: Regional shares of Total Foreign Income |
13 as % of world total |
Table
A3: Regional TSAs: Growth 2000 and projections to 2011
|
|
16 |
17 |
18 |
19 |
20 |
21 |
22 |
23 |
|
|
real growth
2000 |
real growth
2001-2011 (annualized) |
Gross nominal
growth 2001-2011 |
|||||
|
|
Vis Exp |
Oth Exp |
Vis Exp |
Other exports |
Vis Exp |
Oth Exp |
Total For Inc |
Reg % |
|
|
% |
% |
% yr |
% yr |
US$m |
US$m |
US$m |
|
|
Caribbean |
3.5 |
5.0 |
4.2 |
5.4 |
19,480.0 |
3,239.7 |
22,719.7 |
1.5 |
|
Central and Eastern Europe |
11.2 |
17.4 |
4.1 |
1.7 |
39,131.0 |
6,264.0 |
45,395.0 |
3.0 |
|
European Union |
10.8 |
15.8 |
4.6 |
6.6 |
309,240.0 |
350,140.0 |
659,380.0 |
43.4 |
|
Latin America |
5.5 |
25.4 |
3.8 |
8.3 |
16,317.0 |
18,320.0 |
34,637.0 |
2.3 |
|
Middle East |
3.4 |
23.0 |
2.1 |
1.7 |
10,502.0 |
7,172.0 |
17,674.0 |
1.2 |
|
North Africa |
10.0 |
9.4 |
4.1 |
3.7 |
7,980.0 |
2,130.9 |
10,110.9 |
0.7 |
|
North America |
5.5 |
7.0 |
4.6 |
5.2 |
138,470.0 |
148,610.0 |
287,080.0 |
18.9 |
|
Northeast Asia |
15.3 |
15.5 |
7.2 |
8.3 |
87,385.0 |
164,005.0 |
251,390.0 |
16.5 |
|
Oceania |
17.9 |
23.0 |
5.0 |
5.4 |
22,174.8 |
4,322.9 |
26,497.7 |
1.7 |
|
Other Western Europe |
11.9 |
6.2 |
3.7 |
2.0 |
28,580.0 |
5,455.3 |
34,035.3 |
2.2 |
|
South Asia |
19.0 |
11.3 |
13.6 |
9.5 |
24,487.5 |
4,192.6 |
28,680.1 |
1.9 |
|
Southeast Asia |
8.0 |
16.5 |
7.5 |
6.0 |
66,888.0 |
20,847.0 |
87,735.0 |
5.8 |
|
Sub-Saharan Africa |
9.1 |
12.8 |
5.3 |
4.9 |
9,953.7 |
3,977.8 |
13,931.5 |
0.9 |
|
World |
9.7 |
13.5 |
5.0 |
6.2 |
780,450.0 |
739,030.0 |
1,519,480.0 |
100.0 |
Notes and sources
|
Bottom row |
World |
|
|
column |
full title |
source |
|
16 |
2000 Visitor Exports Real Growth |
Regional League Table, Table 25 |
|
17 |
2000 Other Exports Real Growth |
Regional League Table, Table 31 |
|
18 |
Real growth 2001-2011: Visitor exports (% annualized) |
Regional League Table, Table 28 |
|
19 |
Real growth 2001-2011: Other exports (% annualized) |
Regional League Table, Table 34 |
|
20 |
Gross nominal growth 2001-2011: Visitor exports |
difference between 9 and 1 |
|
21 |
Gross nominal growth 2001-2011: Other exports |
difference between 11 and 3 |
|
22 |
Gross nominal growth 2001-2011: Total foreign income |
sum of 20 and 21 |
|
23 |
Gross nominal growth 2001-2011: Regional shares of TFI |
22 as % of world total |
Table
A4: Tourism Satellite Accounts 2001 - Selected economies (I)
|
|
24 |
25 |
26 |
27 |
28 |
29 |
30 |
31 |
|
|
Visitor Exports |
Visitor Exp % |
Other Exports |
Other Exp % |
||||
|
|
US$m |
rank |
% |
rank |
US$m |
rank |
% |
rank |
|
China |
17,252.0 |
7 |
6.3 |
107 |
12,045.2 |
10 |
4.4 |
41 |
|
Cuba |
2,154.6 |
49 |
22.2 |
40 |
106.6 |
84 |
1.1 |
130 |
|
Hong Kong |
11,429.0 |
14 |
4.2 |
129 |
11,909.0 |
11 |
4.4 |
39 |
|
Japan |
7,015.0 |
22 |
1.3 |
151 |
36,946.4 |
3 |
7.1 |
17 |
|
Macau |
3,186.0 |
38 |
57.0 |
6 |
144.2 |
77 |
2.6 |
78 |
|
ROK |
8,424.7 |
19 |
3.8 |
134 |
10,046.0 |
13 |
4.5 |
36 |
|
Spain |
39,433.4 |
2 |
20.6 |
43 |
14,787.0 |
7 |
7.7 |
16 |
|
Taiwan |
3,473.2 |
35 |
2.0 |
148 |
2,775.0 |
23 |
1.6 |
113 |
|
USA |
112,154.0 |
1 |
9.4 |
85 |
84,155.7 |
1 |
7.1 |
18 |
|
Vietnam |
1,012.3 |
64 |
6.9 |
105 |
751.6 |
48 |
5.1 |
30 |
|
World |
601,730.0 |
na |
7.3 |
na |
462,070.0 |
na |
5.6 |
na |
|
Northeast Asia |
50,780.0 |
na |
3.5 |
na |
73,865.0 |
na |
5 |
na |
Notes and sources
|
Bottom two rows |
As Tables A1-3 |
|
|
column |
full title |
source |
|
24 |
2001
Visitor exports (US$m) |
Country
League Tables, Table 23 |
|
25 |
2001
Visitor exports (rank) |
Country
League Tables, Table 23 |
|
26 |
2001
Visitor exports as % of total exports (%) |
Country
League Tables, Table 24 |
|
27 |
2001
Visitor exports as % of total exports (rank) |
Country
League Tables, Table 24 |
|
28 |
2001
Other exports (US$m) |
Country
League Tables, Table 29 |
|
29 |
2001
Other exports (rank) |
Country
League Tables, Table 29 |
|
30 |
2001
Other exports as % of total exports (%) |
Country
League Tables, Table 30 |
|
31 |
2001
Other exports as % of total exports (rank) |
Country
League Tables, Table 30 |
Table
A5: Tourism Satellite Accounts 2001 - Selected economies (II)
|
|
32 |
33 |
34 |
35 |
36 |
|
|
Tot For Inc |
Tot FI % |
Non_Vis % |
Cn % Wld |
Cn % NEA |
|
|
US$m |
% |
% |
|
|
|
China |
29,297.2 |
10.7 |
41.1 |
2.8 |
23.5 |
|
Cuba |
2,261.2 |
23.3 |
4.7 |
0.2 |
na |
|
Hong Kong |
23,338.0 |
8.6 |
51.0 |
2.2 |
18.7 |
|
Japan |
43,961.4 |
8.4 |
84.0 |
4.1 |
35.3 |
|
Macau |
3,330.2 |
59.6 |
4.3 |
0.3 |
2.7 |
|
ROK |
18,470.7 |
8.3 |
54.4 |
1.7 |
14.8 |
|
Spain |
54,220.4 |
28.3 |
27.3 |
5.1 |
na |
|
Taiwan |
6,248.2 |
3.6 |
44.4 |
0.6 |
5.0 |
|
USA |
196,309.7 |
16.5 |
42.9 |
18.5 |
na |
|
Vietnam |
1,763.9 |
12.0 |
42.6 |
0.2 |
na |
|
World |
1,063,800.0 |
12.9 |
43 |
100.0 |
na |
|
Northeast Asia |
124,645.0 |
8.5 |
59 |
na |
100.0 |
Notes and sources
|
Bottom two rows |
As Tables A1-3 |
|
|
column |
full title |
source |
|
32 |
2001
Total Foreign income |
sum of
24 and 28 |
|
33 |
2001
Total Foreign income as % of exports |
sum of
26 and 30 |
|
34 |
2001
Other exports as % of total foreign income |
28 as %
of 32 |
|
35 |
2001
Country shares of World Total Foreign Income |
32 as %
of world total |
|
36 |
2001
Country shares of Northeast Asia Total Foreign Income |
32 as %
of NEA total |
Table
A6 Tourism Satellite Accounts 2011 - Selected economies (I)
|
|
37 |
38 |
39 |
40 |
41 |
42 |
43 |
44 |
|
|
Vis Exp |
Vis Exp % |
Oth Exp |
Oth Exp % |
||||
|
|
US$m |
rank |
% |
rank |
US$m |
rank |
% |
rank |
|
China |
56,955.9 |
6 |
6.6 |
99 |
37,245.8 |
11 |
4.3 |
44 |
|
Cuba |
3,776.4 |
49 |
22.2 |
39 |
205.7 |
85 |
1.2 |
132 |
|
Hong Kong |
29,123.8 |
13 |
3.1 |
136 |
43,893.8 |
7 |
4.7 |
40 |
|
Japan |
17,125.4 |
21 |
1.1 |
151 |
109,412.0 |
3 |
7.3 |
20 |
|
Macau |
8,041.0 |
33 |
63.9 |
5 |
389.9 |
71 |
3.1 |
65 |
|
ROK |
17,038.0 |
22 |
2.2 |
146 |
38,875.3 |
|||