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Asia

North Korea snubs South, restarts Kaesong industrial park

Nearly two years after the Kaesong industrial park was shut down in protest at Pyongyang's nuclear program, output resumes as North Korea seeks new ways around international sanctions. Julian Ryall reports.

North Korea has unilaterally resumed manufacturing operations at the Kaesong industrial zone, nearly two years after the South Korean government withdrew its citizens and mothballed facilities in response to Pyongyang's fourth underground nuclear test and the launch of a long-range rocket.  

North Korean state media hinted on October 6 that the regime had restarted operations at factories in the zone, which is 10 kilometers north of the demilitarized zone (DMZ) that divides the peninsula.

There are strong suspicions, however, that the regime in Pyongyang has been using machinery and materiel left by the owners of around 120 South Korean firms when they were ordered to leave in February 2016 for as long as six months.

The North Korean propaganda website Uriminzokkiri said in a dispatch that the facilities lie within its sovereign territory and that they are therefore subject to North Korean law. It added that other countries - which likely include South Korea - have no right to interfere in the matter.

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History of expropriation

Analysts say Pyongyang has a track record of simply expropriating private companies' assets, but that the regime's actions might indicate a growing desperation in North Korea as sanctions imposed by the United Nations begin to bite.

"This is the latest in a long line of consistent behavior from a country that is run by party directives and where people are told to do something from on high and they simply do it," said Daniel Pinkston, a professor of international relations at the Seoul campus of Troy University.

"They will have seen that South Korean firms left their equipment and raw materials behind and the North will have had no problem in simply expropriating everything that was there," he told DW.

Read more: Kaesong is 'at the heart' of Korean rapprochement

In years gone by, Swedish automaker Volvo was stung when it attempted to set up operations in North Korea, while Chinese railway firms stopped sending their freight cars over the border after the North simply refused to return them.

More recently, Egyptian telecommunications giant Orascom left empty-handed after the North Korean government simply took over control of the company it set up in Pyongyang to build a mobile phone network. Similarly, South Korea's Hyundai invested heavily, with the assent of Seoul, in developing the Mount Kumgang Tourist Region from 1998.

After a South Korean tourist was shot dead by a North Korean soldier at the site in 2008, Seoul banned its nationals from visiting. Two years later, North Korea unilaterally took over the five properties owned by South Korean companies at the site and started promoting Mount Kumgang to Chinese tourists.

Feeling effects of sanctions

Pinkston believes that the North is gradually feeling the effects of international sanctions, although it is very likely that Pyongyang would have expropriated the facilities at Kaesong and resumed operations even without global pressure imposed as a result of its nuclear weapons and missile programs.

The Kaesong industrial zone opened in December 2004 as a confidence-building measure between Seoul and Pyongyang and, in its heyday, had 123 companies employing around 53,000 North Korean workers and some 800 South Korean staff. The wages for the North Korean employees came to $90 million (€76.5 million) a year - and was paid directly to the North Korean government.

Read more: Does the US have to accept North Korea as a nuclear power?

The majority of the South Korean companies using the site were manufacturing clothing and took advantage of the low wages and taxes. Others were producing chemical products, shoes, watches, machinery and electronic appliances.

Stephen Nagy, a senior associate professor of international relations at Tokyo's International Christian University, believes Pyongyang had three main motivations for taking full control of the Kaesong facilities.

"Firstly, they clearly understood the resources that were available and producing domestically would help to reduce the impact of sanctions," he said. "This is also a message to South Korea, that they are pushing forward on their own and that they do not need the South's economic assistance or hard currency any more."

Not willing to be pushed around

"And finally it is also a message to regional powers that the North is not willing to be pushed around any more and that they intend to continue to develop their economy and their nuclear weapons and missile programs in parallel," he said.

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Nagy is also less confident of sanctions forcing the regime in Pyongyang to cede to the rest of the world.

"It seems likely that they are making clothing at Kaesong, just as the South Korean firms did previously, and they can be illegally exported through China or Russia," he said.

"It is not at all clear that those two countries have closed their borders according to the UN sanctions and my sense is that both Beijing and Moscow are trying to engage the North Korean government, for their own ends, rather than isolating them."

South Korea's Unification Ministry, which handles relations with the North, has in the past urged North Korea not to violate the rights of South Korean property owners at Kaesong. Analysts say, however, that Seoul has no effective way of stopping Pyongyang from simply using the equipment and raw materials. Owners of facilities at Kaesong are scheduled to hold a meeting in Seoul on Wednesday to discuss their options.

In recent weeks, North Korea has launched two missiles over Japan and conducted its sixth nuclear test, and may be fast advancing toward its goal of developing a nuclear-tipped missile capable of hitting the US mainland.

US Secretary of State Rex Tillerson said last weekend that Washington was directly communicating with Pyongyang on its nuclear and missile programs but that Pyongyang had shown no interest in dialogue. US President Donald Trump later dismissed any prospect of talks with North Korea as a waste of time.

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