Rethinking Kaesong shutdown

Was it really the best decision? I have asked myself many times, and the answer is always “no.”

The question is about the shutdown of the Kaesong Industrial Complex. North Korea’s nuclear arms program and successful long-range missile launch clearly were serious threats to our national security. It was understandable why the Park Geun-hye administration made the decision to punish the North. But when I asked myself if it was really the best decision, I found myself answering again and again that it was not.

What was the significance of the Kaesong complex? In her Feb. 16 address at the National Assembly, President Park mentioned two reasons why she decided to pull the plug on the project.

She said the South Korean workers in the northern industrial zone could become hostages of the North. She also said the wages to North Korean workers were used to finance the regime’s nuclear and missile programs. The two reasons presented by the president were what critics of the project have consistently argued for the past 16 years.

But Unification Minister Hong Yong-pyo later confessed that there was no hard evidence to prove the misappropriation of the wages, unlike her argument. In fact, money does not have a traceable tag. Therefore, the only valid reason is the possibility that South Koreans there could become hostages. Because protecting the lives of the people is a duty of the state, it is more than enough to shut down the project.

But the decision still leaves several things to think about.

First, did the decision help promote peace on the Korean Peninsula and safety of the people? Was the decision capable of dismantling the North’s nuclear and missile programs and defend peace?

The Kaesong Industrial Complex was not just a factory zone. It was a symbol of peace, a model of shared growth between the two Koreas and a safety pin. That was why the Lee Myung-bak administration did not shut it down, not only in the aftermath of the North’s nuclear test but also after the North sank the Cheonan warship and killed 46 sailors and after it shelled Yeonpyeong Island. Because of the shutdown of the industrial complex, North Korean troops who had pulled back from the city returned.

The distance from Kaesong to the South Korean capital region is about 60 kilometers (37 miles), and Seoul and its vicinity have come under the range of North Korean long-range artilleries with up to 65-kilometer range. It has become a serious threat to the South Korean people.

Another question we need to think about is the usefulness of the complex.

First, the economic usefulness. On Feb. 15, Moody’s Investors Service said “the closure of this last remaining symbol of inter-Korean reconciliation is credit negative for the South, as it heightens geopolitical risk.” Moody’s said heightened geopolitical risk can hurt South Korea’s capital, current and fiscal accounts. The credit rating agency also said foreign direct investment will fall, and funding costs for the public and private sectors will increase.

If we want to hurt the North economically, we must think about China. With the shutdown of the complex, the North will lose just $100 million of wages. While the North lost $400 million in trade and another $400 million in income for procession-on-commission under the May 24 sanctions, it is overcoming the loss by expanding trade with China.

Second, the complex is a bridgehead for peaceful unification. Prof. Rudiger Frank of the University of Vienna wrote in his contribution to 38 North, a North Korea-focused website, that “as an East German, I can only repeat how deeply subversive the experience of observing, let alone interacting with, West Germans was before unification.” He also wrote that Kaesong was a “huge propaganda machine,” and the North Korean workers couldn’t help but believe that the South was a land of plenty. According to him, the complex, just by being in operation, has the potential to change the North.

Third, it will reduce unification costs. We are promoting unification because unification, not division, will improve lives in both Koreas. If the North collapses now, the South Korean economy cannot sustain the impact. West Germany experienced economic recession for a long time after unification. The economic gap between the two Koreas is far larger than that of East and West Germany at the time of German unification.

The South Korean economy is more vulnerable than that of West Germany. Under this circumstance, unprepared unification is destined to collapse. When the second and third Kaesong Industrial Complex is opened, unification costs will go down and economic growth will be helped.

Other than these reasons, Kaesong has other uses. That is why I am saying it is not the best decision to shut it down.

To promote peaceful unification, we must continue diplomatic efforts to resolve nuclear and missile issues while reviving the complex, because there is more to gain from the security and economic points. In fact, we must build more inter-Korean industrial complexes. And the North Korean policy in the future must designate the Kaesong Industrial Complex and others like it as “projects to build a foundation for peaceful unification” and prevent the intervention of political and military judgments.

On Aug. 14, 2013, the two Koreas agreed that the industrial complex will be operated normally under any circumstances. We must remember that agreement. The days of separation between politics and economics are missed today.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Feb. 29, Page 31

*The author, a former prime minister, is head of the Korea Institute for Shared Growth.

by Chung Un-chan