Kaesong support foundation to dissolve as early as next week

The Kaesong Industrial Complex in North Korea as seen from across the demilitarized zone in Paju, Gyeonggi, on Dec. 18 last year. [YONHAP]

The public foundation that supports operations at the Kaesong Industrial Complex is set to be dissolved as early as next week, according to Seoul's Unification Ministry, amid a deepening chill in inter-Korean relations.

The ministry said Sunday that the Kaesong Industrial District Foundation’s current functions would be handed over to the civilian-run South-North Korea Exchanges and Cooperation Support Association at a Cabinet meeting on Tuesday, with the foundation itself to be dissolved a week later.

The announcement comes two months after the ministry first said it plans to terminate the foundation because of the low likelihood of South Korean operations restarting at the Kaesong Industrial Complex and the high costs of maintaining the support foundation.

The ministry noted that the foundation had lost its raison d’être as the number of claims filed by companies that had invested or built plants in the Kaesong Industrial Complex decreased from 1,181 in just 2016 — the last year that the zone was in operation — to a mere 97 for the five years between 2018 and 2023.

The ministry also said the chances of the zone reopening were very low due to the North’s continued and increasing unauthorized use of South Korean-built production facilities and infrastructure, despite the ministry’s repeated requests that it stop doing so.

The ministry said that most of the foundation’s staff had accepted severance before its expected closure, adding that less than 10 employees had requested to be reassigned to the civilian support association or working on the foundation’s liquidation process.

The foundation’s website has already shut down.

An official with the Unification Ministry said the foundation’s dissolution would not alter Seoul’s plan to pursue legal action against Pyongyang for its continued operation of the Kaesong Industrial Complex.

The Kaesong Industrial Complex, which opened in 2004, was one of two economic cooperation projects near the inter-Korean border that resulted from the so-called Sunshine Policy pursued by the Kim Dae-jung and Roh Moo-hyun administrations.

The other project was the Mount Kumgang tourism resort on the eastern coast of North Korea.

The resort closed in 2008 after the North Korean military fatally shot a South Korean tourist whom the regime claimed had entered a restricted area, but the industrial zone carried on until 2016 when the South withdrew all of its workers from the site after the North carried out a rocket launch.

In its heyday, the Kaesong Industrial Complex hosted more than 120 small South Korean factories that produced clothes, consumer electronics and other goods and employed more than 54,000 North Korean workers from the surrounding region.

Before relations between South and North Korea began deteriorating in 2008, the zone was seen as a harbinger of the unrealized economic potential of inter-Korean cooperation.

Companies that operated factories at Kaesong hoped that the zone would reopen during a short-lived thaw in relations that began in 2018.

But those hopes were dashed after the North blew up the Inter-Korean Joint Liaison Office inside the complex in 2020 to express its anger over Seoul’s failure to stop North Korean defectors from flying balloons laden with anti-Pyongyang leaflets across the border.

According to Voice of America (VOA) on Saturday, satellite images taken on Feb. 24 show that the North has completed removing the ruins of the destroyed building.

VOA also reported that satellite images showed at least 10 buses near factories once operated by South Korean companies, indicating that the North still uses these facilities to continue production.

BY MICHAEL LEE [lee.junhyuk@joongang.co.kr]