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Kaesong's future

Julian Ryall, Seoul
May 6, 2013

North Korea may have turned the violent rhetoric down a notch in recent days, but tensions remain across the Korean peninsula . The focus now is on the fate of the Kaesong industrial complex.

South Korean security guards keep watch as South Korean trucks return to South Korea's CIQ (Customs, Immigration and Quarantine) after they were banned from entering the Kaesong industrial complex in North Korea, just south of the demilitarised zone separating the two Koreas, in Paju, north of Seoul, April 3, 2013 (Photo: REUTERS/Kim Hong-Ji)
Image: Reuters

The last seven South Korean nationals departed from the Kaesong Industrial Park on Friday, bringing down the curtain on a project designed to build bridges between the two ideologically opposed governments on the Korean peninsula and leaving the future of the facility in limbo.

The seven were the last of around 800 South Koreans working at Kaesong when the latest crisis to grip the region erupted after the North carried out its third underground nuclear test in February.

The departure of the last South Koreans for the 10 kilometer journey back across the world's most heavily fortified border was delayed by North Korean officials demanding that the owners of businesses who have fled the industrial park pay the wages of the 53,000 North Korean laborers at the facility. That figure is estimated to total 7.2 million US dollars, but was paid directly to the North Korean government.

There were also disputes over taxes and a number of service charges, while the South Korean company owners were trying to salvage what was left of their businesses by transferring finished products and unused materials back to the South.

Geo-political pawn

Even though it was eventually resolved, the stand-off is likely to have increased the reluctance of companies to return to a facility that is effectively a pawn in the broader geo-political game.

And while the North Korean regime was believed to be raking in close to 100 million US dollars a year from the joint project, which was set up in 2003 as a symbolic bridge between the two ideologically opposed governments on the peninsula, a spokesman for Pyongyang told DW that it was of no consequence to North Korea if the South Korean companies did not return.

"The North Korean plan now is to just wait and see how South Korea responds," said Kim Myong-chol, executive director of The Centre for North Korea-US Peace and a mouthpiece for the regime in Pyongyang.

North looking elsewhere

"What happens next depends entirely on South Korea," he added. "The North could close Kaesong completely and later invite companies form other countries to set up there."

Kim declined to comment on which countries might be invited to start operations at the site.

South Korean vehicles return from the inter-Korean Kaesong Industrial Complex in North Korea to the customs, immigration and quarantine (CIQ) office in the South, just south of the demilitarized zone separating the two Koreas in Paju, north of Seoul early April 30, 2013 (Photo: REUTERS/Lee Jae-Won)
Friday's departure also cuts one of the only official lines of communication between the KoreasImage: Reuters

"We do not care if South Korean companies are there or not," he said. "We do not need them to make money and we can make more from other companies because South Korean firms only pay a very low annual wage anyway. If it wants its companies to come back, South Korea has to apologize to us and explain why it holds a hostile policy towards us," Kim said.

"It must display a sincere attitude towards North Korea."

In fact, Kim says the South needs access to Kaesong far more critically than the North because its economy "is in bad shape" and the industrial park was the "only place they could turn to for cheap labor and resources." In contrast, he claims the North Korean economy is growing rapidly and standards of living for ordinary people are rising - "much faster than anyone in the rest of the world expected."

Those claims are dismissed by Robert Dujarric, director of the Institute of Contemporary Asian Studies at the Japan campus of Temple University.

Alert on N. Korea's potential nuke test A researcher at the Korea Institute of Nuclear Safety in Daejeon, 160 km south of Seoul, looks at radiation detection monitors on Feb. 5, 2103 amid reports on North Korea's imminent third nuclear test. (Yonhap)/2013-02-05 16:19:07/
North Korea rejected latest offer of talks with the SouthImage: picture alliance / Yonhap

"The companies in there are doing pretty low-tech production and it was quite important for a number of medium-size South Korean companies, but it is no way vital to the South Korean economy," Dujarric told DW.

Seeking money and apologies

"It seems that the North effectively took a few people hostage at the facility because they wanted more money. This is always the risk that you run with North Korea, but usually it boils down to them wanting more money and apologies," Dujarric said, adding that from past experiences "we can see that in the end South Korea and the US would rather pay for stability in the short term than see this evolve into a far larger and more serious crisis."

Dujarric can imagine South Korean companies returning. "The two sides may be able to reach an agreement because, from Seoul's point of view, any kind of relationship with Pyongyang is better than nothing," he said. "But the only thing we are able to predict with any certainty is that ties with the North are going to be uncertain."

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