Page 2 of 2 Are Kaesong curtains drawn for good?
By Aidan Foster-Carter
Little noticed at the time, North Korea's first threat to the Kaesong Industrial Complex (KIC, as South Korea calls it; the North says zone, thus KIZ) came as early as February 7. A report that the South would henceforth inspect inbound cargoes more rigorously in line with UNSC sanctions enraged the North's National Economic Cooperation Committee (NECC). KCNA's prophetic headline read: "S Korea Will Have to Pay Dearly for 'Sanctions' against KIZ".
The North warned that in the event of any provocation, it would "take such resolute counter-actions as withdrawing all privileges
for the KIZ and restoring the area as a military zone". In fact, the KIC carried on as normal, nor is it clear if inspections were in fact stepped up. However, on March 30 - the same day as the "state of war" announcement, but separately - the North's General Bureau for Central Guidance to the Development of the Special Zone (GBCGDSZ) released a statement that KCNA headlined: "DPRK Warns Future of Kaesong Industrial Zone Depends on S. Korea's Attitude".
Taking offense at Seoul media suggestions that the North was keeping the KIC open because it needed the money - to the contrary, they claim (as in the February 7 statement) that it is their act of charity, based on "compatriotic feeling for the minor enterprises and poor people in south Korea" - this went on: "It is an extremely unusual thing that the Kaesong Industrial Zone is still in existence under the grave situation."
It warned ominously: "The south Korean puppet forces are left with no face to make complaint even though we ban the south side's personnel's entry into the zone and close it" (emphasis added). And that is precisely what happened. On April 3, without notice (although with hindsight the GBCGDSZ's threat quoted above was a warning) the North began refusing entry to Southern personnel and vehicles.
The ironically named Demilitarized Zone (DMZ) is still the world's most heavily armed frontier, but in recent years it was no longer totally sealed. The former "Sunshine" policy saw two border crossing points opened: near the east coast for access to the Mt Kumgang resort, and Dorasan north of Seoul - not far from Panmunjom, previously the sole point of contact under the 1953 Armistice Agreement - for the KIC.
The east coast route fell into disuse since July 2008, when the South suspended tourism after a middle-aged female visitor was shot South Korea-North Korea Relations May 2013 dead at Mt Kumgang and the North refused to let the South send in its own investigators. But Dorasan stayed busy. Southern managers and other staff commuted (weekly or in some cases daily) from in and around Seoul, while trucks took raw materials and other supplies in and finished goods out.
Last June, as we reported, Dorasan clocked up its millionth border crosser in nine years. (There used to be a railway service too, briefly. But the North was never keen, and this was also less economic for the 123 SMEs in the zone than road transportation. So Dorasan's gleaming new station now stands forlorn.)
The road crossing looks set to join it in disuse. The North had restricted border crossing in the past, so at first the hope in Seoul was that this too would only be a temporary blip. The ban was one-way: South Koreans were allowed to leave the KIC, but few did for fear of not being let in again.
On April 4, a day after the entry ban began, the North's Committee for the Peaceful Reunification of Korea (CPRK) - which despite its name issues threats as fierce as every other DPRK body - warned "the puppet group" over its "provocative racket". ROK Defense Minister Kim Kwan-jin - an unplanned holdover from the Lee Myung-bak era after Park Geun-hye's first
choice for the post withdrew in face of allegations of scandal - is an especial Northern bugbear. This time the "die-hard warmonger" had spoken - unsurprisingly in the circumstances - about potential hostage scenarios.
Seething with faux fury, the CPRK warned the "puppet group" that "it had better control its mouth, mindful that the Zone is less than 40 km from Seoul". And then this: "[T]he shutdown of the Zone has become imminent. If the south Korean puppet group and
conservative media keep vociferating about the Zone, we will take a resolute measure of withdrawing all our personnel from the Zone".
And so they did. Four days later on April 8, Kim Yang Gon, a senior secretary of the Central Committee (CC) of the North's ruling Workers' Party (WPK), visited the KIC. Declaring it to be "in the grip of a serious crisis ... due to such hideous confrontation maniacs as Kim Kwan-jin," Kim announced two "important steps". First, the DPRK would "withdraw all its employees from the zone". Second, "it will temporarily suspend the operations in the zone and examine the issue of whether it will allow its existence or close it".
Sometimes North Korea is as good as its word. Next day, April 9, none of the 53,448 DPRK workers in the KIC showed up for work; nor have they since. Still hoping this might just be a temporary ploy, Southern businesses at first kept going as best they could. Their government naturally protested, while offering talks which the North rebuffed.
As the month wore on the situation became unsustainable, as food and other supplies (eg, medicine) began to run short. On April 26, the ROK government felt it had no option but to tell its remaining citizens in the KIC to come home. All did so by May 1, bar seven who were still discussing unpaid wages and the like; with typical perversity, the trucks the North turned away included one carrying $7 million for March's wages.
Seoul quickly scotched some media spin implying this was in any way a hostage situation. The final seven returned early on May 3; at the same time as the North let in a truck carrying $13 million for wages and taxes. Rude and petty to the last, North Korea thus even made the South in effect pay for the privilege of being kicked out.
Can the KIC come back?
Is this the end? Some in Seoul still harbor hope. Pyongyang sent a high-level negotiator, but only to discuss details of the closure. As of May 6 the South, which supplies electricity to the KIC, was still doing so - but on a much smaller scale than before, given the fall in demand. This suffices to keep a water purification plant running, which by some accounts serves part of nearby Kaesong city as well.
The center-right Seoul daily Joong Ang Ilbo, in an article on May 6 headlined "A ray of hope to reopen Kaesong park still blinking", said that the DPRK had asked for electricity and water supplies to be maintained. That can be seen as barefaced cheek - or as the Joong Ang put it, a ray of hope. This being North Korea, perhaps it is both.
Turning power or water on and off is easy. Not so a project like the KIC, where real damage has been done that will not quickly be undone. A precedent here is Mt Kumgang, whose five-year impasse has seen the North confiscate Hyundai and other ROK assets worth some $400 million - but not sell them or get much use from the resort, which is only really viable for South Korean tourists. One conceivable way out could be to swap one suspension for another: If the South lets tours to Mt Kumgang resume, the North could reopen Kaesong.
Yet unlike the late Chung Ju-yung, the Hyundai patriarch whose long-term vision and deep pockets underwrote both the Kumgang and Kaesong zones, the Southern SMEs in the KIC are strapped for cash. They invested there in good faith, mainly for cheap labor, only to be kicked in the teeth by the North for no fault of theirs. Are many or any of them ready to risk it again? Their
own government is offering 300 billion won (US$272 million) compensation, but that hardly suffices; it cannot repair the reputational damage from their inability to fulfill contracts since Pyongyang pulled the plug. The global marketplace is even less forgiving than the DPRK, if more impersonally. If you don't deliver, there may be no second chance.
Does North Korea understand this, or care? Unconfirmed reports reaching Seoul suggest that the North may have planned this move long ago, and has no intention of rescinding it. The evidence for this, such as it is, is of two kinds. First, it is claimed that Kim Jong-il, having allowed the creation of the KIC, changed his mind for fear of its long-term impact.
On April 29 the Seoul-based Daily NK quoted what it said was an anonymous source in Pyongyang: "Kim Jong-il's greatest concern of all was that as the Kaesong Industrial Complex got bigger it would cause a growing number of workers to harbor feelings of interest and longing for South Korean society. Kim Jong-eun is now focusing on Kim Jong-il's injunction that 'you must move decisively to close it as soon as you see a chance.'"
Second, other anecdata indicate that the KIC workers have now been widely dispersed in North Hwanghae province, and perhaps further afield. By all accounts they are not pleased at losing their jobs and being assigned to quite different ones (eg, on collective farms), nor at having to undergo "study sessions" where they must relate every encounter they ever had with South Koreans. This too hardly suggests that the KIC has a future.
Guns and butter
But does North Korea's left hand even know what its right hand is doing? A further puzzle is that at the very same time that it was gratuitously sabotaging its only established and fully South Korea-North Korea Relations May 2013 functioning special economic zone - there are two new ones with China, but it is early days yet - the DPRK was claiming to want more of these.
In a significant but baffling move, if mainly beyond our scope in a journal whose remit is bilateralism, even while threatening the world in practice the regime was also busy backing this up with a brand new theory.
On March 31, a hastily called plenary meeting of the WPK Central Committee (announced only on March 27), self-described as "historic", proclaimed a new party line: the simultaneous development of nuclear weapons and the economy (byungjin in Korean).
"Guns or butter" is a term used in Economics 101 to signal the inexorability of choice in allocating resources, but Kim Jong-eun seems to think he can have his cake and eat it. The same meeting promoted the DPRK's sole certified reformer, former premier Pak Pong-ju, to the Politburo. Pak impressed South Koreans when he visited there as chemical industry minister leading an economic delegation in 2002, in happier times.
Appointed premier in 2003, he spearheaded the tentative reforms instituted (but never formally announced) in 2002, but was sacked in 2007 as the tide turned in favor of diehard anti-marketeers. So his return to the top echelons is good news. Better yet, next day on April 1 the Supreme People's Assembly (SPA), the rubber-stamp parliament, reappointed Pak as premier. The man he replaced, elderly loyalist Choe Yong Rim, as usual gave an economic report.
This concluded with an unexpected peroration:
All the fields and units of the national economy should build under a long-term plan export bases for producing second-stage and third-stage processed goods and finished goods of high competitiveness at international markets by relying on locally available resources and indigenous technology. Latest scientific and technological achievements should be positively introduced to increase the varieties of exports and remarkably raise
their quality. Trade should be made diversified and multilateral while conducting a variety of trade activities. The joint venture and collaboration should be actively promoted and the work for setting up economic development zones be pushed forward.
Good advice indeed. But how can one reconcile this with destroying the KIC? South Korean
Unification Minister Ryoo Kihl-jae, the architect of Park's "trustpolitik" approach and as such a very disappointed man currently, made the obvious comment: "If they act like this, who will invest in the North?" For all sorts of reasons, from capital shortage to UNSC sanctions and reputational issues, byungjin is a non-starter. Nuclear weapons and economic development are
not a both/and, but an either/or.
Finally, the news on May 13 that North Korea has appointed its fourth defense minister in barely a year is a reminder that below the surface all is far from smooth in Pyongyang. Among the several hypotheses advanced to explain the DPRK's threatening demeanor in recent months, one is that Kim Jong-eun still needs to impress the military by acting tough. Changing the minister of People's Armed Forces so frequently suggests he is not impressing them that much, and that he is failing to control them. If behind the scenes a power struggle is raging in Pyongyang, North Korea's stance toward the South and the wider world could yet change - hopefully for the better.
Aidan Foster-Carter is honorary senior research fellow in sociology and modern Korea at Leeds University, and a freelance consultant, writer and broadcaster on Korean affairs. He has visited South Korea some 25 times in the past 30 years, starting in 1982.
This article first appeared in Comparative Connections, Part of the Pacific Forum Center for Strategic and International Studies. Published with permission.
(Copyright 2013 Center for Strategic and International Studies)
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