South Korea Clings on to Fear of Kaesong Industrial Complex Future

By | March 02, 2017 | No Comments

Industries in the Kaesong Industrial Complex | Image: Wikicommons

In a Jangmadang translation published on February 10, Sino-NK highlighted the extent to which many in South Korea retain a keen interest in the fate of the Kaesong Industrial Complex (KIC), even though more than a year has now passed since it was unilaterally closed by the Park Geun-hye administration. Of course, the demise of the inter-Korean manufacturing zone in response to North Korea’s fourth nuclear test on January 6, 2016 means that millions of dollars of South Korean assets remain stuck in limbo inside North Korea. The thought of such a large paper loss turning into a real one is enough to concentrate minds.

But over and above the financial questions that the closure inevitably raises, the KIC is also a potent symbol of economic and political engagement between North and South Korea in the period 1998-2007. Its fate has an emotional component.

Given the baggage it carries, it is entirely natural that the KIC would be a source of controversy. And with a presidential election looming on the horizon in South Korea, it is becoming even more so. How each of the putative presidential candidates says he would cope with the KIC question to some extent reflects his general political orientation. However, the KIC isn’t just a standard left vs right issue. The political right is relatively unified in its opposition to reopening the complex, but on the left there are divisions.

The center-left People’s Party takes a hard line in keeping with the party stance: progressive on the economy and conservative on defense. Provincial governor Ahn Hee-jung is approaching the issue cautiously, too. He rightly regards the Minjoo Party’s lack of credibility on national security as a major barrier to a progressive presidency. Conversely, Moon Jae-in, the current front runner, and the mayor of Seongnam, Lee Jae-myung, have both expressed support for reopening the complex. Ahn faces an uphill battle against Moon, but his shift to the right is justified given the Minjoo Party’s commitment to an open primary in which anyone who has a bank authentication certificate (은행용 공인인증서) and takes the time to register can vote.

The most prominent South Korean fear is that North Korea might unilaterally lease KIC facilities to third parties. And indeed, a report published in the Joongang Ilbo on February 24 (translated below) suggests that North Korea is actively seeking to do exactly that.

The article implies that evidence of North Korean actions might have been gathered in Dandong, where a great many exchanges between North Korea, South Korea and China take place. The whole story is rather poorly sourced and thus very hard to verify, but we do know of instances of North Korea taking similar actions. Pieces of construction equipment left behind at the site of nuclear reactors being built in North Korea were removed and used for other purposes. Yet, for all North Korea’s aggressive rhetoric about South Korea’s decision to withdraw from engagement projects, nothing has happened to South Korean assets in the Mt. Kumgang Tourist Zone in North Korean Gangwon Province, which closed almost nine years ago after the shooting of a South Korean visitor. Similarly, the aforementioned February 10 report about Kaesong showed that even the blue buses that once ferried workers to and from their workplaces remain in storage on KIC grounds.

It is hard to imagine the North Korean side abandoning all hope of reopening the KIC with South Korea at the moment, given that the South Korean presidential front runner has articulated a commitment to reopening it and, more importantly from North Korea’s perspective, the issue is effective at dividing South Korean society. Pyongyang also has no desire to grow even more reliant on the Chinese economy than it already is. From a DPRK geopolitical standpoint, it would be preferable to get back into bed with Seoul. But that does not mean the report is necessarily false. Duplicity is nothing new to North Korea, and with Moon Jae-in’s lead far from bulletproof, Pyongyang would be wise to explore all its options.

Pak Yong-han, “[[Exclusive] North Korea, transferring closed Kaesong Industrial Complex to Chinese enterprises, entering complex and even manufacturing test products]” [[단독] 북한, 폐쇄된 개성공단 중국 기업에 넘기나, 공단에 들어가 시제품까지 만들어], Joongang Ilbo, February 24, 2017.

Conflict is expected after details emerged of North Korea trying to transfer the shuttered Kaesong Industrial Complex (KIC) to Chinese companies. An intelligence official said on the 23rd, “Since summer last year, the North Korean authorities have been meeting Chinese enterprises in and around Dandong to try and attract them to the KIC.” The same source went on, “Last month, I met several people from Chinese enterprises who had returned from North Korea,” explaining, “A number of Chinese enterprises have visited the KIC a few times, and even made trial products there.” Analysis suggests that the Chinese businesses are already operating factories in Pyongyang and other regions of North Korea. This is the first time that information has suggested that Chinese enterprises have entered the Kaesong Industrial Complex. Recently, North Korea attracted criticism for trying to sell KIC products to South Korean and Chinese enterprises.

The source said, “When Chinese company officials hesitated over whether or not to invest, the North Koreans even promised to operate their section of the New Amnok River Bridge properly.” North Korea and China completed the New Amnok River Bridge (신압록강대교) back in 2014, but it has yet to be connected to the North Korean road network. A North Korea expert with a South Korean state policy research institute said, “North Korea put off construction over concerns about over-reliance on the Chinese economy,” adding, “Their promise to do the road construction was designed to show positive intent.” The source said that someone from Chinese customs had informed him, “[The bridge/road] will be completed this year.

North Korea previously attempted to attract companies operating in China and Hong Kong to the Kaesong Industrial Complex. Cho Byung-hyun of IBK Economic Research Institute explained, “In 2013, Kim Yang-gon intervened in the issue personally,” adding, “The fact that North Korea is again trying to attract Chinese companies shows that they are still quite attached to the Kaesong Industrial Complex.” Conversely, a government official said, “In the end, does their urgency not show that sanctions against North Korea are effective?”

Source: Pak Yong-han, “[[Exclusive] North Korea, transferring closed Kaesong Industrial Complex to Chinese enterprises, entering complex and even manufacturing test products]” [[단독] 북한, 폐쇄된 개성공단 중국 기업에 넘기나, 공단에 들어가 시제품까지 만들어], Joongang Ilbo, February 24, 2017. Translation by Christopher Green.