This Week in Asia

How South Korea's 2010 ban on cross-border trade burned one man's dream of building a fried chicken empire in the North

Choi Won-ho had grand plans when he became the first person to introduce South Korean fried chicken to the North in 2007.

The businessman, who made headlines when he opened the Rakwon Chicken Restaurant in Pyongyang's Moranbong district, hoped to eventually establish 100 outlets in North Korea.

But the dreams turned to dust overnight when cross-border relations crashed after a South Korean navy ship exploded and sank in March 2010, claiming the lives of 46 sailors.

More than 1,100 South Koreans, including Choi, saw their businesses in the North evaporate after the conservative Lee Myung-bak government slammed the door shut on investments in retaliation for the Cheonan sinking " an incident for which North Korea has denied responsibility.

Choi Won-ho, wearing a hat inscribed with a slogan calling for compensations for his lost investment in North Korea, at his restaurant in Seoul. Photo: Park Chan-kyong

Choi went from being the owner of a four-storey building in western Seoul to operating a modest chicken-and-beer restaurant " with his wife working alone in the kitchen and him serving dishes in the hall and making food deliveries.

Burned by the dramatic turn of events, Choi has no confidence that any diplomatic rapprochement between the United States and North Korea at the next Trump-Kim summit would be of benefit to him.

US President Donald Trump is scheduled to meet North Korean leader Kim Jong-un in Hanoi on February 27 and 28, with Trump seeking a commitment of nuclear disarmament by the North and Kim looking for punishing sanctions on the regime to be lifted.

"Even if things improved following the summit, it would be next to impossible for me to come back to Pyongyang and start all over again as I have simply no money," he told the Post.

"For me, this would be something like the rice cake in a picture. Even if you want it, you can't eat it," he said, using a Korean saying.

A publicity menu for Choi Won-ho's Pyongyang restaurant. Photo: Park Chan-kyong

Choi had been importing and distributing chicken from the US into South Korea until 2005, when he started buying from the North instead to capitalise on the short shipping distance, lower transport costs and lower wages, as cross-border trade picked up following the 2010 inter-Korean summit.

Buoyed by the improving relations between the North and South, Choi started a joint venture with a North Korean partner in 2007, opening Pyongyang's first restaurant specialising in chicken. Customers could pick and eat the chicken in parts " legs, wings, drumsticks, neck and back, which were roasted, fried or sauteed and served with beer " rather than whole as is customary in the North.

The Rakwon Chicken Restaurant turned out to be an immediate success, attracting some 100 customers per day despite having a relatively expensive menu for the average North Korean " about US$22 for a sauteed "seven-aroma chicken" for a portion large enough to be shared by four persons.

But the business skidded to a halt when then-President Lee banned all economic ties with the North, with only the Seoul-invested industrial park in Kaesong allowed to continue operating.

"It was like a thunderbolt from the blue. My investment in the North worth half a million dollars was gone overnight like that," he said. "We went there assured, because the government said it would be OK to do business in the North. A few years afterwards, it said: 'Now you can't go there any more'."

The ban on cross-border economic activity saw 1,146 South Korean firms lose money on investments in restaurants, service stations, hotels and factories. Others failed to receive shipments of North Korean products they had already paid for.

Some 500 of the affected businesses were approved to receive compensations worth US$110 million, amounting to about one-third of their losses, said the Unification Ministry after the liberal President Moon Jae-in took office in May 2017.

Jeong Sook-kyoung, a spokeswoman for the 1,146 companies, said many businesses that did not receive compensation were driven to bankruptcy and those who were compensated recouped a mere fraction of their losses.

"Many of the 1,146 companies advanced to the North long time ago and were unable to come up with proper documents to prove their losses which are demanded by authorities," she said. "Many of them went bankrupt and turned into debtors as the result of the 2010 measure."

Choi was unable to recover a single penny from the government as his documents failed to convince the authorities of his investment losses.

"I went there with government blessings and then lost everything due to its unilateral decision," he said.

Bang Young-guk, a friend of Choi's, lost US$840,000 worth of zinc ore which he had transferred to the North for processing. He was not compensated on grounds that his company went bankrupt months before the 2010 decision.

"Even if sanctions on the North are lifted as a result of diplomatic rapprochement between the North and the United States, I wouldn't go there again. I've had enough," Bang said.

"North Koreans themselves have long lost interest in trading with South Koreans. They are now more interested in dealing with Chinese who pay in cash upfront for their products and for a good price.

"They are also only interested in attracting big investors, hopefully from China, Europe, Japan and the US down the road," he said.

Bang, who still maintains contact with North Korean partners and friends, said there were difference between what he hears from these North Koreans and Kim Jong-un's commitment to a complete denuclearisation of the Korean peninsula.

"They told me the North won't give up its nuclear weapons. They expect their country to negotiate on an equal footing with the US and hope it will eventually be allowed to remain a nuclear-armed state like India with a promise not to proliferate," Bang said.

For Choi, his more immediate concern is the future of his little chicken-and-beer restaurant in Seoul, where he has taken to wearing a tie since his Pyongyang business collapsed eight years ago.

Standing next to a motorcycle he uses to deliver his Matdaero (to-your-taste) brand chicken and beer outside his ground-floor restaurant, he vowed: "I won't take off my tie till I repay all my debts."

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

More from This Week in Asia

This Week in Asia5 min read
Everyone Loves 'Daddy': Forget Thaksin, Thanathorn Juangroongruangkit Is The Thai Junta's New Billionaire Rival
The law is after him, the ladies call him "daddy", and he's running in Thailand's impending elections promising a welfare state. As the March 24 polls draw nearer, the 40-year-old scion of Thailand's biggest auto-parts manufacturer is emerging as a d
This Week in Asia4 min read
For Vietnamese, The Trump-Kim Summit Is A Celebration Of The Country's Post-war Progress
After his capture while fighting for the communists during the Vietnam war, Nguyen Duc Gan endured four years of brutal captivity in a POW camp run by the US-allied South Vietnamese. Today, Nguyen, 72, holds no grudge against the Americans. In fact,
This Week in Asia4 min read
Thailand's Junta Up In Arms Over Plan To Cut Military Outlay - As Neighbours Like Singapore And Indonesia Spend More
Slash defence spending and end conscription? Such proposals from Thailand's leading anti-junta political party have had the country's citizens cooing in agreement ahead of the first elections since a 2014 coup, but some industry analysts say the dras