North Korean Nuclear Threat Clouds Kaesong Breakthrough

By Parameswaran Ponnudurai
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South Korean soldiers stand at a military checkpoint leading to North Korea's Kaesong joint industrial complex, in the border city of Paju, July 10, 2013.

An agreement clinched by North and South Korea to reopen a joint industrial zone will help boost ties on the Korean peninsula and maintain a rare channel for the North to rake in hard currency, experts say.

But they caution that the impoverished, hardline communist state's economic development will still be constrained by its defiant nuclear weapons drive.

The two Koreas reached a deal Wednesday to restart the industrial complex in North Korea's third-largest city, Kaesong, following its abrupt closure by Pyongyang in April after threatening nuclear strikes on the South and the U.S.

The resumption of the Kaesong Industrial Complex paves the way for the two Koreas to address other thorny bilateral issues, including humanitarian issues such as divided family reunions, economic and cultural cooperation measures, and the establishment of a peace park at the demilitarized zone separating the North and South, said Scott Snyder, a Korea expert at the New York-based Council on Foreign Relations.

"Inter-Korean negotiations on these issues are unlikely to be easy, but it is now possible for such negotiations to proceed on the basis of a recognition of overlapping concrete interests in cooperation through the resumption of Kaesong," he said.

Despite the salvaging of Kaesong, Snyder thinks "one major obstacle to North Korea’s economic prosperity and integration with its neighbors" is its firm decision to remain a nuclear power while seeking economic changes.

'New strategic line'

In a major policy decision, North Korea's leader Kim Jong Un in March presided over a plenary meeting of the powerful Central Committee of the ruling Workers’ Party, which set a "new strategic line" calling for building both a stronger economy and nuclear arsenal.

The decision came just about a week before Pyongyang ordered the closure of the joint industrial project after its defiant third atomic test drew additional international sanctions.

While Kaesong is now about to open its doors again, the North’s declaration that its nuclear weapons “are neither a political bargaining chip nor a thing for economic dealings" hinders any prospects of North Korea being willing to negotiate away its nuclear arms.

"The economic development objective is bolstered by North Korea’s decision to salvage Kaesong on South Korean terms, but the nuclear development objective continues to stand as a major obstacle limiting Kim Jong Un’s ability to deliver on pledges that the North Korean people will not again have to 'tighten their belts,'" Snyder said.

The five-point agreement to reactivate the Kaesong complex was reached during the seventh round of talks between the two Koreas, which have committed to making "active efforts" to resume its normal operations as soon as possible.

The agreement, among its other terms, requires both Koreas to “guarantee the normal operation of the complex” including stable access to the work site, protection of corporate assets, and the quarantine of the complex from political developments in inter-Korean relations.

They also vowed to "prevent" any repeat of the suspension of the Kaesong industrial complex.

Tightening the screws

Even though the North relented to most of the South's terms for restarting the industrial complex, experts caution that Seoul may find it difficult to use the project to tighten the screws on Pyongyang in the future.

"On the agreement itself, I think it shows that pressure does work on North Korea, particularly when its economic lifeline to the outside world is threatened," said Bruce Klingner, a North Korea expert at the Washington-based Heritage Foundation.

But he expressed caution over a clause in the agreement guaranteeing the industrial zone's operations "without influence of any kind from the political situation."

"That's worrisome if it constrains South Korea from pulling the plug on Kaesong if North Korea does another attack," Klingner warned, obviously referring to Pyongyang's deadly November 2010 artillery raid on South Korea.

Earlier that year, a North Korea torpedo was blamed for an explosion of a South Korean warship, killing 46 sailors.

Call to abandon project

Klingner felt South Korean President Park Geun-Hye should abandon the Kaesong project altogether although she maintained a "principled" approach throughout the negotiations to restart the project.

South Korean companies have produced a total U.S. $2 billion worth of goods during the previous eight years while North Korea is estimated to have received U.S. $80 million in workers' salaries in 2012, an average of U.S. $127 a month per person, paid in U.S. dollars, according to the Unification Ministry in Seoul.

Still, Klingner said the nine-year-old project—the last symbol of economic cooperation between the two Koreas— "is not economically viable."

"When it was initially opened, its advocates predicted dramatic expansions fueled by large number of South Korean and foreign firms. That clearly has not happened. Foreign investors have avoided it because of the frequent production stoppages and the security risks and Pyongyang arbitrarily nullifying contracts," he said.

"Politically, the Kaesong experiment has failed because it did not bring about any kind of economic or political reform in North Korea, nor did it moderate North Korea's foreign policies, nor did it prevent continued North Korean threats and even attacks on the South."

Although skepticism regarding North Korea’s credibility remains, the salvaging of the Kaesong project "avoids the worst" for North Korea’s economic situation, given the negative signal Kaesong’s closure would have sent to the world regarding North Korea’s potential as a business partner, Snyder said.

Key test

The agreement to restart the project was welcomed by the United Nations and the United States, which has called on North Korea to mend ties with U.S ally South Korea before any resumption of dialogue.

A key test for the project will come when the U.S. and South Korea begin annual military drills next week.  Pyongyang had cited a similar joint exercise earlier this year as the main reason for Kaesong's closure.

"If the drill takes place, conditions in the region will become unpredictable and escalate to the brink of war," the North's ruling-party newspaper Rodong Sinmun said last month.


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