Factories That Ran on Korean Cooperation Go Silent

By Hyung-Jin Kim & Youkyung Lee 9 April 2013

SEOUL, South Korea — A factory complex that is North Korea’s last major economic link with the South was a virtual ghost town on Tuesday after Pyongyang suspended its operations and recalled all 53,000 of its workers, cutting off jobs and a source of hard currency in its war of words and provocations against Seoul and Washington.

Only a few hundred South Korean managers remain at the Kaesong industrial complex, which has been run with cheap North Korean labor and South Korean capital and know-how for the past decade. The managers have not been forced to leave the facility just north of the Demilitarized Zone.

One manager said on Tuesday that he and his colleagues are subsisting on ramen but planned to stay and watch over the company’s equipment as long as their food lasted.

New South Korean President Park Geun-hye, who has sought to re-engage North Korea with dialogue and aid, expressed exasperation with what she called the “endless vicious cycle” of answering hostile behavior with compromise, only to get more hostility.

Pyongyang said on Monday it would recall all North Korean workers from the complex and would decide later whether to shut it down for good.

The work stoppage at the biggest employer in the North’s third-biggest city shows that Pyongyang is willing to hurt its own shaky economy in order to display its anger with South Korea and the United States. North Korea has a per capita GDP of $1,800 per year, far below that of its neighbors in Northeast Asia, according to the U.S. State Department.

Pyongyang has unleashed a torrent of threats at Seoul and Washington following U.N. sanctions punishing the North for its third nuclear test, on Feb. 12, and joint military exercises between the U.S. and South Korea that allies call routine but that Pyongyang sees as invasion preparation.

U.S. and South Korean defense officials have said they’ve seen nothing to indicate that Pyongyang is preparing for a major military action in which it would be heavily outgunned. But they have raised their defense postures, and so has Japan, which deployed PAC-3 missile interceptors in key locations around Tokyo as a precaution on Tuesday against possible North Korean ballistic missile tests.

Analysts say North Korea’s rhetoric and actions are intended to force Pyongyang-friendly policies in South Korea and Washington and to boost domestic loyalty for Kim Jong Un, the country’s young, still relatively untested leader.

Park, who took office in February, said she is “very disappointed” by the suspension of operations at Kaesong, and that it would only scare away any opportunity for North Korea to bring in foreign investment.

“North Korea should stop doing wrong behavior and make a right choice for the future of the Korean nation,” Park said at the start of a regular Cabinet Council meeting, according to a South Korean media pool report posted on the website of her office.

The Kaesong complex is the last symbol of inter-Korean rapprochement projects from previous eras of cooperation. Other projects such as reunions of families separated by war and tours to a scenic North Korean mountain became stalled in recent years.

Kim Yang Gon, secretary of the Central Committee of the Workers’ Party of Korea, announced Monday on a visit to Kaesong that operations at the complex would be suspended. He said the facility “has been reduced to a theater of confrontation.”

Kim said in a statement released by state media that North Korea will now consider whether to close the complex permanently. “How the situation will develop in the days ahead will entirely depend on the attitude” of South Korean authorities, it said. The message did not say what would happen to the about 400 South Korean managers still at Kaesong.

Some North Koreans who worked overnight shifts at Kaesong were still there on Tuesday morning, but South Koreans said those scheduled for day shifts didn’t show. A North Korean woman at Kaesong said in a telephone call that her night shift was done and she was headed home.

One of the South Koreans who remained at Kaesong on Tuesday said he planned to stay there until food runs out. He said he and four other colleagues had been living on instant noodles.

“We haven’t had any rice since last night. I miss rice,” he said on Tuesday morning. “We are running out of food. We will stay here until we run out of ramen.”

The more than 120 South Korean companies operating at Kaesong urged North Korea to quickly normalize operations. “If this situation continues, companies will face the risk of going bankrupt,” said Yoo Chang-geun, a vice president of the Corporate Association of Gaesong Industrial Complex.

After an emergency meeting on Tuesday in Seoul, representatives of the companies said in a joint statement that they hope to send a delegation of small- and medium-sized companies to North Korea in hopes of reopening the complex. The statement also appealed to South Korea to take a “mature, embracing posture” and work out all available measures to help normalize Kaesong’s operations.

In noting the shutdown, the United States referred to a Central Committee of the North’s ruling Worker’s Party statement a little more than a week ago, in which it described the economy as one of the nation’s top two priorities. The other is building nuclear weapons.

State Department spokesman Patrick Ventrell said closing the complex “would be regrettable, given that more than 50,000 North Korean people are employed there, and it would not help them achieve their stated desire to improve their economy and better the lives of their people.”

South Korea’s Unification Ministry, which is responsible for relations with the North, issued a statement saying South Korea will act “calmly and firmly” and will make its best efforts to secure the safety of South Koreans at Kaesong.

North Korea has threatened to fire nuclear missiles at the United States and claimed it had scrapped the 1953 armistice that ended fighting in the Korean War. Last week it told foreign diplomats based in Pyongyang that it will not be able to guarantee their safety as of Wednesday. Embassy workers appeared to be staying put. There have also been worries in Seoul of an even larger provocation from Pyongyang, including another possible nuclear test or rocket launch.

The barrage of North Korean threats has made North Korea increasingly isolated. China, its most important ally, expressed unusual disappointment when Pyongyang announced last week that it was restarting a plutonium reactor to produce more nuclear-bomb fuel.

Even before Monday’s announcement, Pyongyang had been allowing operations at the Kaesong complex to wither. Last month it cut the communications with South Korea that had helped regulate border crossings at Kaesong, and last week it barred South Korean workers and cargo from entering North Korea.

Operations had continued and South Koreans already at Kaesong were allowed to stay, but dwindling personnel and supplies had forced about a dozen companies operating at Kaesong before North Koreans were told to stop working there.

North Korea briefly restricted the heavily fortified border crossing at Kaesong in 2009, but manufacturers fear the current closure could last longer.

South Korea’s Unification Ministry estimates 53,000 North Korean workers in Kaesong received $80 million in salary in 2012, an average of $127 a month, paid in U.S. dollars. The Unification Ministry says Kaesong accounted for nearly all two-way trade between the Koreas. Cross-border trade, including supplies entering Kaesong and finished products coming out, approached $2 billion annually.

North Korea objects to portrayals in the South of the zone being crucial to the impoverished country’s finances. Kim said North Korea “gets few economic benefits from the zone while the south side largely benefits from it.” North Korea has also expressed outrage over South Korean discussion of military rescue plans in the event Pyongyang held the managers hostage.

AP writer Eric Talmadge in Tokyo contributed to this report.