Two Koreas conclude Kaesong fee negotiation

The two Koreas concluded a 13-month negotiation process on Thursday regarding the amount South Korean companies should pay North Korea for their use of land at the Kaesong Industrial Complex (KIC).

According to the Ministry of Unification, the two sides agreed that South Korean companies will pay a fee of 64 cents per 1 square meter (10.76 square feet). An official agreement was signed between the Kaesong Industrial District Management Committee of the South and North Korea’s Central Special Zone Development Guidance General Bureau.

Pyongyang had demanded $1 per 1 square meter throughout the negotiation, which began in November 2014, while the South insisted on the rate of 50 cents.

An official from the Ministry of Unification said that Seoul presented several international precedents to persuade Pyongyang and cited the operations model at the Samsung Electronics factories in the Yen Phong Industrial Zone in Vietnam.

According to the source, Samsung Electronics pays 50 cents per 1 square meter for its smartphone factory in Vietnam. Qingdao Sino-German Ecopark charges in the range of 64 cents.

“The land usage fee was settled based on the peculiar nature of the KIC, international standards and the financial considerations of the companies,” the official said. “It serves the goal of improving the global competitiveness of the industrial zone.”

Kim Yong-hyun, a North Korean studies professor at Dongguk University, said the deal was meaningful in that Pyongyang had remained flexible when Seoul presented international norms.

The KIC first opened in 2004 as a symbol of inter-Korean economic cooperation. Currently, 124 South Korean businesses operate factories there and employ about 54,000 North Korean workers.

The companies were exempt from paying a land usage fee until the end of this year. While the North demanded that the South pay the fee for all the land that was supposed to be developed under the deal, Seoul insisted that it pay only for the land on which the businesses actually operate.

After more than a year of negotiations, the North accepted the South’s argument and decided to levy the fee for only the 920,000 square meters of the land used out of the complex’s total 3.3 million square meters.

BY CHUN SU-JIN, SER MYO-JA [ser.myoja@joongang.co.kr]