Southern workers flee Kaesong

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Southern workers flee Kaesong


South Korean vehicles that left the Kaesong Industrial Complex arrive on Saturday at the customs, immigration and quarantine office in Paju, Gyeonggi. A total of 125 South Korean workers and one Chinese returned to the country that day in 63 vehicles approved by the North. The remaining 50 South Koreans will return today. By Park Jong-keun

Business owners at the Kaesong Industrial Complex agreed to withdraw all their workers as the government recommended, pulling the plug on the last remaining cooperative venture between North and South Korea from the Sunshine Policy days.

Many of the 123 companies doing business at the complex are now on the verge of going bust.

The government told the companies Friday to pull out the remaining 176 workers, who had struggled to protect their operations after North Korea pulled its 53,448 workers on April 9.

A total of 125 South Korean workers and one Chinese returned to the country on Saturday by 63 vehicles, approved by the North. The remaining 50 South Koreans will return today.

The South Korean government did not say whether it would cut off the electricity supply, which would completely shut down the industrial park.“Halting the electricity supply to the complex is a very subtle issue, which will be discussed after all South Korean workers come back on April 29 [today],” said Kim Hyung-suk, the South’s Unification Ministry spokesman, on Saturday. “Despite the ongoing Kaesong deadlock, Seoul is still open to dialogue with Pyongyang.”

A group of South Korean businessmen convened an emergency meeting Saturday at the Seoul office of an association representing the South Korean firms in the complex and decided to follow the decision of the government on vacating the venture park.

“Although it was regrettable that the government didn’t give any prior notice to us in regards to the withdrawal, we decided to accept the government’s decision,” Han Jae-kwon, head of the association, said.

The biggest victims of the suspension are the owners of the 123 South Korean firms, many of which could go bankrupt. Their business partners are calling for compensation as the factories stopped producing earlier this month. They may also lose their factories entirely if North Korea confiscates them.

“Many owners of factories think they will face bankruptcy,” Han said. “Some owners were persistent in refusing to withdraw their workers.”

The Unification Ministry, which is in charge of all inter-Korean business, announced Friday the workers should leave the complex for their own safety after Pyongyang rebuffed a demand and ultimatum by Seoul to engage in dialogue to solve the Kaesong issue.

On April 3, North Korea imposed a ban on any materials or people coming into the complex from the South and withdrew its 53,000 workers six days later. The South Korean government and businessmen continued to ask for the resumption of operations or, at least, permission to send materials, food and medicine to the 175 South Korean workers inside. Pyongyang turned down all those requests.

South Korean businessmen say the biggest problem for them is to deal with complaints from their buyers and business partners.

“Our buyers had hoped the entry ban would be lifted at the end of April or in early May [after Korea-U.S. joint military exercises end],” Han said. “But after all our employees are withdrawn, the complaints from our buyers and partners will surge.”

Businessmen fear that Pyongyang will confiscate the facilities and the raw materials in the complex as it did after 2008 when South Korean tours to the Mount Kumgang Resort stopped after a tourist was shot by a North Korean guard. Mount Kumgang was one of the other joint business ventures arranged during the Sunshine Policy days of engagement of the North.

Under the inter-Korean cooperation agreement, the North must not nationalize the assets of the South or confiscate them. In Mount Kumgang, the North ignored the agreement.

“We basically brought raw materials from our buyers in the South, manufactured products in the complex and provided the finished products to our customers,” Moon Chang-seop, chairman of Samduk Tongsang, a shoe manufacturer based in Busan, said. “We [the 123 firms] have about 5,700 affiliates and partners in the South, so the [shutdown of] the complex will have great repercussions on them starting next week.”

“Although the facilities are ours, the raw materials belong to our buyers,” Chung Ki-sup, head of SNG, an apparel manufacturer, said. “Even if we go bankrupt, we should return the raw materials to our buyers.

But the government didn’t say anything about how they would deal with that.”

The businessmen said the South Korean government should take responsibility for their losses, not the North.

According to Unification Ministry’s statistics, the amount South Korean companies invested in the Kaesong complex is approximately 560 billion won ($504 million), mostly for building factories and production lines. The government invested 400 billion won on infrastructure such as roads, power grids and water and sewage systems.

Among the 123 firms, 96 are covered by inter-Korean business insurance by the Export-Import Bank of Korea, which covers 90 percent of their losses up to 7 billion won for each firm. The Unification Ministry didn’t release official estimate of the losses, but some private analysts say they could reach 6 trillion won in total.

Although the Unification Ministry has said it will provide some kind of compensation for the companies, the companies say it won’t be enough.

“Most of all, the issue is not compensation,” Han of the association said. “We want to resume operations and restore the complex.”

The businessmen have requested North Korea to allow visits to the complex tomorrow, part of their efforts to persuade Pyongyang to reopen the zone.

Pyongyang has not said it will shut down the complex. For North Korea, the complex was considered a vital source of hard currency. In 2012, the average monthly wage of North Korean workers was $134, and the regime earned about $80 million in total.

A spokesman of the North’s General Bureau for the Special Zone Development Guidance, a North Korean organization in charge of the complex, said in an interview with the state-run Korean Central News Agency Saturday that it will be the South Korean government who should take the responsibility for the complex if it’s shut down.

The spokesman said the regime is “closely watching whether the madam of the Blue House would will make the only remaining inter-Korean business ... a scapegoat for her confrontational policy.”

By Kim Hee-jin []
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