South Koreans 'May Quit' Zone

Tensions escalate over an inter-Korean economic zone launched during a period of relative detente.

Kaesong-Close-305.jpg South Korean-owned factories located in the North Korean joint industrial estate of Kaesong, Nov. 24, 2008.

SEOUL—South Korean business leaders say they may consider pulling out of a joint economic zone on North Korean territory amid worsening ties and increased economic demands from Pyongyang.

South Korea began limiting the numbers of its citizens allowed to cross the border into the Kaesong Industrial Zone following North Korea's April 6 rocket launch.

The detention of a South Korean employee by the North on political charges has also ratcheted up tensions around the zone, which was set up just inside North Korea amid thawing relations between the two sides in 2004.

"At this stage, I don’t know to what extent the North Korean demands can be accommodated, but all I can say is that, if our investment becomes unprofitable, we’ll have no choice but to leave," Lee Im Dong, head of a committee of South Korean enterprises invested in Kaesong, said.

More talks set

At talks on Friday, Pyongyang refused to release a factory worker who has been held for months, Kim Young-tak, leader of the South Korean delegation, said. But the two sides agreed to meet again on July 2 to continue negotiations, he said.

"We strongly urged the early release of our detained worker and demanded access to him," Kim said.

North Korea responded there is "no problem" with him.

...If our investment becomes unprofitable, we’ll have no choice but to leave."

Lee Im Dong

A statement from the committee in charge of the Association of South Korean Enterprises Invested in the Kaesong Industrial Complex said North Korean demands for increased wages for its workers in the zone could be discussed following an improved investment environment.

"If the business environment guaranteeing personal safety and the necessary freedom of circulation improves, and if the productivity of North Korean workers in Kaesong improves, that’s when negotiations regarding wage increases should be held," the statement said.

The association's comments were quickly backed up by South Korean Foreign Minister Yoo Myung Hwan, who commented at a June 12 news conference that "it may be hard to continue operations in Kaesong while incurring a loss."

The Kaesong zone, which employs some 36,000 North Koreans in mostly South Korean factories making textiles, watches, footwear, and other light industrial goods for export, has been criticized for providing Pyongyang with a "cash cow" to finance its military and nuclear ambitions.

Pay raise sought

Earlier this month, North Korea asked that the salaries of North Korean workers in Kaesong be increased to an average of U.S.$300 a month, and that South Korea pay half a billion dollars for the land lease—31 times more than the amount stipulated when agreements governing Kaesong were signed.

South Korean enterprises rejected Pyongyang's demands.

"It is unacceptable to act contrary to the regulations stipulated in the Agreement on the Operation of the Kaesong Industrial Complex, the content and spirit of inter-Korean agreements, and the basic principles governing our initial investment in Kaesong," the Kaesong Association said last week.

Relations between South Korean investors and North Korean officials were already strained with the March 30 detention of a South Korean employee of the Kaesong-based Hyundai Asan factory, allegedly for encouraging North Koreans to defect and for criticizing the communist regime.

And in March, in protest against a joint South Korea-U.S. military exercise, the North blocked the border crossing to the industrial complex several times, affecting production in some factories.

Losses incurred

Experts have called for bilateral talks to hash out a clear framework for the running of Kaesong to prevent economic fallout from political events in future.

South Korean businesses invested in Kaesong say they have already incurred serious losses because of the South Korean won's depreciation against the U.S. dollar.

The government's Unification Ministry said it expected lengthy negotiations to ensue following the new demands from the North.

Yang Moo Jin, professor at Kyungnam University’s Graduate School of North Korea studies, said it was unclear whether the amount of money requested by the North Korean side was meant only to state their negotiating position, or whether it was supposed to unilaterally state a decision made at the top levels of leadership.

Original reporting in Korean by S.W.Park. Korean service director: Insop Han. Translated by Grigore Scarlatoiu. Written for the Web in English by Luisetta Mudie. Edited by Sarah Jackson-Han.


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