[ Investment > Straight From The Heart ]

lood in the Daedong
  On Aug. 16th 1866, an alien apparition appeared off the west coast of Korea - the land known as Joseon to its people, and the ¡°Hermit Kingdom¡± to most others. A black, iron hull cut through the water, a plume of coal smoke trailed behind and a rectangle of cloth brightly embossed with stars and stripes crackled in the wind. For Koreans watching from the shore, the vessel must have been a curious sight - and an alarming one when she nosed into the mouth of the Daedong River and set course upstream for the city of Pyeongyang.

  The ship was a privately owned armed American merchantman: the General Sherman, a former Confederate blockade-runner. The China offices of the British firm Meadows and Co. had retained the ship and her crew to force trade with the mysterious Hermit Kingdom. In her hold were sheets of tin, cotton and glass. On her decks were a mixed crew of Chinese and Malays officered by Americans; a British missionary was also aboard as an interpreter. The men must have felt some apprehension as they gazed across the water at the Koreans on the lush riverbanks monitoring their progress upstream: every turn of the screw was taking them deeper into a forbidden land. Perhaps they spent their time readying cannon and personal weapons; possibly they discussed the profits they expected to realize from the Korean leopard skins, gold and ginseng they wished to trade for. We can imagine the Sherman beating slowly upriver through the muggy summer heat haze in the foreground, with the mountains of northern Korea shimmering in the distance. But we can only imagine.for nobody from the ship lived to tell the tale.

  The Sherman dropped anchor below the walls of Pyeongyang, off Yanggak Island. Korean intermediaries delivered supplies to the vessel, but disputes broke out with local officials when the crew demanded they be allowed to trade. This demand was refused by royal edict; trade with foreigners was forbidden. Frustrated, the crew took hostage a local official. The situation rapidly deteriorated. Fighting flared up. At first, the Sherman¡¯s cannon gave her the advantage. Over the course of several days, a number of attacks were beaten off. But the Sherman¡¯s fate was already sealed. The heavy rains that had permitted the ship to pass over the rapids below the city ceased. When the water levels fell, the Sherman was trapped. The Koreans reappraised their tactics. On Sept. 5th, fire ships were launched and the American vessel caught light. Those crew members not consumed by the flames abandoned ship. What happened next is unclear. Some Korean sources say the men were hacked down in the shallows. Others state that some survivors were taken prisoner and executed a day or two hence. In a particularly grisly footnote, some of their body parts were removed and used for medicine; one U.S. source later stated that their bodies were ¡°pickled.¡±

  The destruction of the Sherman and the killing of her crew in 1866 marked the first ever attempt at Korean/American commercial intercourse. It was not an auspicious beginning.

  Making Contact
  In the age of gunboat diplomacy, the Sherman incident could not pass unnoticed - or un-avenged. In 1871 the U.S. Asiatic squadron launched a retaliatory raid against the forts on Ganghwa Island (Ganghwa was known as ¡°the gate to the capital¡± due to its dominance of the HanRiver estuary). American marines succeeded in taking and destroying the forts, but they were impressed with the resistance they encountered: while the Americans suffered three dead, the Koreans fought fanatically, losing 350. The photographer accompanying the expedition took the first photos ever shot on Korea soil - including the first-ever transaction between an American and a Korean: an extant photo shows a Korean dressed in white, carrying off a pile of empty ale bottles, a cigarette holder and a copy of the Boston Globe.

  The action.which came to be known in the United States as the ¡°Weekend War ¡±.settled nothing.The Americans sailed away. Only after the United States signed a treaty with Japan in 1876 was U.S. interest in the Hermit Kingdom revived. After various diplomatic channels were used, a treaty establishing relations between the Kingdom of Joseon and the United States was signed in 1882. A staff arrived in Seoul in 1883 to set up the American legation.the first Western legation in the Kingdom. Trade could now take place legitimately.

  American Entrepreneurs and the Dawn of Modern Korea
  The earliest U.S. businessperson to locate in Korea arrived from Japan. One Captain George Mott arrived at the free port of Chemulpo, Incheon in 1883, but died of natural causes two weeks after his arrival. He had the dubious distinction of being the first occupant of Incheon Foreign Cemetery; the fate of his cargo is unknown. He was followed by a Captain Cooper, who did better than his predecessor - but not much. Cooper lived like a beggar in Chemulpo selling preserved goods and liquor. Soon, however, some rather more successful Americans would introduce a range of exciting new things to Korea.

  In the first-ever Korea/U.S. defense deal, American Trading Company, a Japan-based enterprise, sold breechloading rifles to the Korean army in 1883. American Trading Co.¡¯s James Morse was instrumental in starting Korea¡¯s first rail line between Seoul and Incheon, completed in 1899/1900. The appearance of the first train. imported from New Yo r k.caused some consternation: only after a peasant ran up and kicked the engine without suffering any apparent ill effects did the curious populace dare approach it. (Appreciative onlookers rewarded the peasant with a drink for his brave feat.) An alumni of American Trading Co., Walter Townsend, went on to become one of the most influential foreign businessmen in early Korea; as well as his own trading interests, he was the agent for Standard Oil Co. of New York, which set up a depot on Wolmi Island and imported kerosene to supply the lamps of Korea; Townsend, a shrewd operator, was also importing the lamps themselves.

  Two particularly energetic American entrepreneurs, Henry Collbran and Harry Bostwick, established Seoul¡¯s streetcar line in 1898. One of their investors was King Gojong, who had his own personal streetcar built. The operation faced teething troubles: there were rumors that the streetcars had sucked up clouds, causing a drought, and rickshaw pullers were concerned that the line would put them out of business. When a young child was run over and killed by one of the very first streetcars, a crowd burned the offending vehicle. A second car was overturned, and there were a number of riots. However, the streetcars gradually became an accepted part of the urban landscape, and continued to play a key role in Seoul¡¯s public transport until the 1950s. Bostwick and Collbran also began the first commercial film shows; originally, they had shown films as a public relations gimmick to drum up interest in their streetcar line (those who went all the way to the end of the line were treated to a rope walking performance or a movie) but interest was such that Collbran launched a stand-alone film business. Bostwick and Collbran also set up Seoul Electric to supply power to the line, as well as to Seoul¡¯s first electric streetlights, which were installed in 1904. (Members of Thomas Edison¡¯s staff had earlier installed electric lights in the royal palaces in 1900).

  A further group of adventurous American investors were granted the lucrative concession to operate gold mines in Unsan, in the rugged, tiger-haunted forests of Korea¡¯s northwest. Despite labor problems, competition from local gold panners, the harsh weather and terrain and even threats from bandits, the company, Oriental Consolidated Mining, was a success. Investors included King Gojong and William Randolph Hurst. The mine had been a considerable risk for its founder, Leigh Hunt, who had been living one step ahead of his creditors in Shanghai: in 1901 he was able to return to his hometown of Seattle in triumph, where he treated his (long-suff e ring) creditors to a sumptuous meal and repaid all his loans - with interest added.

  All the above were successful ventures - but dark days lay ahead. Japan, a dynamic and dangerous nation in this period, had defeated China in the Sino-Japanese War of 1894/5. After her victory in the Russo-Japanese War of 1904/5, she was left the sole power on the peninsula. With the acquiescence of the United States and the Britain, Japan declared Korea a protectorate in 1905 and annexed the nation as a colony in 1910.

  Koreans had gone from being the inhabitants of a quiet, backwater nation in the1860s, to a bewildered people facing pressures from France and the United States, finally becoming pawns in the power rivalries of China and Japan, and later Russia and Japan. For the Koreans, the colonial period was a 35-year tragedy. While expatriates in the colony did not suffer nearly as hard a time as did Koreans under Japanese rule, for U.S. enterprises in the colony also, it was a depressing period. Over time, non-Japanese business people were forced out of the picture. The streetcars went to Japanese company in 1909. The last significant holdout of U.S. business was Oriental Consolidated Mining Co, which was finally pressured to sell out to a Japanese competitor in 1938.

  Looking Back
  Today, we are a world away from the days described above. Defying the bad karma of that first fatal contact, the United States is the single-largest investor in Korea, her major trading partner and the republic¡¯s closest ally. But what remain of those early U.S. enterprises in Korea? Is there any historical continuity?

  American Trading Company, the pioneer U.S. company in Korea ceased operations in Korea in the 1980s, but its position as a supplier of defense products has been taken by a number of U.S. firms, with Lockheed Martin and Boeing now supplying Korea with some of the most advanced fighter jets in the world. In the power business, Standard Oil Co. of New York is a corporate ancestor of today¡¯s Caltex.which today has some $3 billion in assets in the country through its joint venture with LG, established in 1967 as Korea¡¯s first privately owned oilrefining operation. In the transportation sector, Bostwick and Collbran once ran Seoul¡¯s streetcars; today, GM Daewoo is a key player in the Korean auto industry. Speaking of the streetcars, Gojong¡¯s personal streetcar predates Kim Jong-il¡¯s notoriously luxurious train by one hundred years. As for Oriental Consolidated, the seams in the mines never quite ran out.: gold found in Unsan reportedly remains a source of hard currency for the North Korean regime today. And the old free ports of Chemulpo, Busan and Wonsan, in which so much early commercial activity took place, are mirrored in the planned ¡°Free Economic Zones¡± designed to transform Korea into the hub of Asia.

  Finally: what of the General Sherman? To investigate this, we must return to the Hermit Kingdom of 2003, North Korea- where it is claimed that the man who led the charge on the ship was none other than the great, great, great grandfather of Kim Il-Sung. A mystery surrounds the fate of the ship herself. The anchor chains hang in Pyeongyang central history museum, and her cannon are believed to have been removed and remounted in the Ganghwa forts. The ship¡¯s metal hull is unlikely to have been destroyed by the fire that sent her crew over the sides. Some believe efforts were made to refloat the vessel in order to provide Korea with a modern ship. Others think the hulk may have been melted down to make weapons.

  Some even believe she was eventually re-floated, recommissioned, re-named and sailed back across the Pacific. Yanggak-do, the island in the Daedong off which the Sherman was destroyed is now the site of Pyongyang¡¯s premier international hotel. The U.S. spyship the Pueblo is moored off this island; she was captured off Korea¡¯s west coast at the height of the Asia Cold War in 1968, 102 years after the Sherman¡¯s destruction. How much of a coincidence is it that the hotel at which so many Western businesspeople now stay sits on a site redolent of two the most negative incidents of Korea¡¯s interaction with the West?

By Andrew Salmon
(Andrew_Salmon@kr.bm.com)
Senior Consultant,
Merit/Burson-Marsteller, Seoul