[Viewpoint] How to resolve the Kaesong issue

As North Korea stood strongly against the resolution passed by the United Nations Security Council on June 13, the third inter-Korean meeting on the Kaesong Industrial Complex scheduled for June 19 is taking on new significance.

While the discussion will be limited to the pending issue of Kaesong, it is the only channel of talk maintained between Pyongyang and the rest of the world. The meeting offers little hope of a wider dialogue. Both Seoul and Pyongyang made clear that they would respond to the Kaesong project separately from other political and military issues.

North Korea recently demanded that the South raise wages of the North Korean workers to $300 a month, four times the current level, and announced it would raise the land lease fee to $500 million, about 31 times the amount the South has already paid. It also proposed shortening the land usage fee grace period and a tax hike.

At first glance, these demands are very hard to accommodate. However, there is room for negotiation since the hard-liners in Pyongyang seem to want to express their political dissatisfaction toward the South Korean authorities with the excessive demands while at the same agreeing to additional contacts.

Despite the hard-liner voices in the North, the demands for a wage increase are relatively easy to bring to a compromise.

In fact, working-level officials on the North Korean economy are known to have an internal guideline that a 20 to 30 percent increase from the current wage level would be necessary. Currently, the annual rate of wage increase is limited to 5 percent.

Therefore, if North Korea agrees to gradually improve the corporate management environment to enhance productivity of North Korean workers, guarantee the personal security of the South Korean workers, grant smooth transit, communication and customs and allow autonomy in labor-management issues, South Korean companies will review the wage raise in a positive frame of mind.

In particular, companies can accept a plan to differentiate wage levels according to workers’ academic and career backgrounds or a bonus payment system related to productivity.

Therefore, instead of demanding that all workers be paid $300 indiscriminately, Pyongyang would be better off accepting the suggestions of the South Korean companies. In some cases, there could be workers who would be paid more than $300.

However, just as the Kaesong Industrial Complex Management Committee made clear in the statement made at a news conference, the demand to raise the land lease fee to $500 million should be retracted so that it complies with the related regulations and contract conditions agreed upon by the South and North Korean authorities.

Some South Koreans misunderstand Pyongyang’s claim as a threat to pressure Seoul to fulfill the inter-Korean summit declarations of June 15 and Oct. 4 by demanding money and using South Korean companies and workers as pawns.

Moreover, tearing up the existing contract could act as a fatal weakness to the investment environment in North Korea.

If Pyongyang unilaterally changes the land lease contract renewal that requires mutual agreement, North Korea’s international credit standing could be greatly damaged, and Pyongyang could lose a lot more than what it bargained for.

It needs to show that it can at least respect legal contracts.

The hard-liners in the North need to realize that the shutdown of the Kaesong complex could ultimately threaten the North Korean system.

If Pyongyang totally betrays the trust of the domestic and foreign investors, it will have a hard time recovering the lost confidence even if it makes progress on future nuclear talks.

If it continues on a unilateral approach, the North cannot expect to accomplish meaningful economic restoration or build a successful structure for a power succession in the next 10 years.

In this context, saving the Kaesong Industrial Complex is important for both the present and the future of North Korea.

Pyongyang needs to actively work to resolve obstacles to the development of the Kaesong complex by addressing the issue of the prolonged detainment of a South Korean worker and withdrawing the limitations on workers’ entries and stays. This would be the minimum requirement in order to begin a discussion on humanitarian assistance for the food and fertilizer Pyongyang so desperately needs. Also, it is the shortcut to resuming the activities of many humanitarian organizations in the South.

*The writer is a professor at the Institute for Far Eastern Studies at Kyungnam University. Translation by the JoongAng Daily staff.

by Im Ul-chul