Putting the Breaks on the Kaesong Industrial Complex


North Korea on Wednesday delayed the entry of South Koreans to a joint industrial complex in a rare move amid high tensions on the Korean peninsula, the South’s Unification Ministry said.

They first made their threat on March 30th, but only took 4 days to actually close the complex. In their defense, they announced the closure with deep regret. The reason for closing? They say, it’s because they can’t import materials into the complex:

A representative of Company B even said, “Today, they were supposed to provide the corporations with raw materials and gas, but if we aren’t given any of this consistantly, we’ll have to stop the factory boilers, and because there won’t be any raw materials, and thus we’ll have to stop production.
오늘 원자재와 가스가 기업체로 들어가는 날이었는데, 만약 정상적인 공급이 이뤄지지 않으면 공장 보일러의 가동이 중단되고 자재가 없으니 생산에 엄청난 차질을 빚을 것”이라고 말했다.

The 개성공업지구 (Kaesong Industrial Complex), has been the last vestige of the Sunshine Policy, after North-South relations were completely frozen, after the Mt. Kumgang shooting, where a South Korean 55-year-old lady wandered off in a restricted area, and was shot by guards. South Korea closed all tourism at the Mountain, and the North responded with kicking out Hyundai Asan, the corporate conglomerate that financed investments at the site. Ever since it was closed, the only North-South investment to make any money for the North, has been the http://en.wikipedia.org/wiki/Kaesong_Industrial_Complex.

Despite the Rocky tensions due to the Cheonan Sinking, the YeonPyeong Shellings, and the various missile tests and nuclear detonation, the Kaesong Industrial Complex has continued unabated. Now, despite the North having made all sorts of threats to shut it down, I’m actually quite surprised that they actually went ahead and did it. Around, 8-9am Korea Time on April 3, the North Korean government telling all South Korean citizens in the Complex that they may return to the South:

All other travel into the complex however, is not allowed:

The reason for my initial skepticism of the North actually closing this down, was that it’s a major cash cow. There is some speculation that this is a temporary fluke, just as in the past:

Ups and downs: The North, always in need of ways to express its displeasure, has intermittently disrupted operations—though so far only for short stretches. In 2008, it temporarily restricted access and expelled some businessmen after South Korean activists launched balloons carrying anti-Pyongyang materials over the border. The next year it briefly refused to allow businessmen to travel to and from the site in protest over an annual U.S.-South Korean military drill.

I’d like to point out that the Mt. Kumgang Tours were closed ever since 2007. Granted, I haven’t ever compared the numbers of revenue generated between the two, but I’m willing to bet that the Industrial Complex generates more money, and more steadily compared to the tours –Not a lot of people willing to climb a mountain during winter months, at the risk of falling off some icy cliff. Yeah, this is going to hurt both the North and South, but the North must be hurting for cash, now that they’re shutting this off, right?

Well, maybe North Korea has some other cash cow (aka China?) investing in their country? According to Mr. Marcus Noland, North Korea has been running an account surplus:

It is also bad news for us. If North Korea is running current account surpluses, then they are less vulnerable to foreign pressure. The collapse of the “Leap Day” deal and the subsequent provocations are more explicable if the country is running a surplus (and has China in its corner).

There are also rumors that the newly (re-?)appointed 박봉주 (Pak, Pong-Ju), a man reportedly of 장성택 (Jang, Song-Thaek)‘s faction.

Pak Pong Ju, a former Prime Minister and rumoured proponent of Chinese-style economic reforms, has been re-appointed to the position by North Korea’s parliament after being forced to step down in 2007.

Pak was first appointed as premier in 2003, taking over from Hong Song Nam, after North Korea passed modest economic reforms. It was believed at the time that he favored Chinese-style reforms, but what he ultimately passed was eventually rolled-back by 2005.

His appointment is likely to renew talk that North Korea will try and reform its economy.

“He is a very friendly and competent person. I met him in Pyongyang and, from my conversations with him, I’m convinced he will be good for the North Korean economy,” Felix Abt, author of A Capitalist in North Korea told NK NEWS.

So are there really plans to reform other parts of the economy to the point that they really don’t need the complex? Let’s just hope this latest spout really is a temporary fluke.

For a full history of the trials and tribulations between the North and South over the complex:

UPDATE: April 3rd, 2013, 22:58 PST
It appears I spoke too soon. Luckily, there’s NKNews to set me straight:

Rumors that North Korea had given workers until April 10th to clear the Kaesong Industrial Complex burst onto the internet late Wednesday (early Thursday in Korea), but were quickly denied by the Ministry of Unification.

The Ministry said that a businessman was asked to submit a list of workers who planned to leave by next Wednesday, but misunderstood it as an order to leave the complex.

Thursday marked the second day in a row that South Korean workers were not allowed to enter the complex.

UPDATE: April 4rd, 2013
The Industrial Complex is still operational, but they’re not letting any Southerners in.

Those who are still there, are still welcomed to go home:

VOICE OF AMERICA: There is a threat from the North to shut down the Kaesong Industrial Complex, which is jointly run by both countries. If that happens, what are the prospects for direct talks between the two Koreas?

EVANS REVERE: I think the prospects would be slim, to say the least. I think that would be an unfortunate step. It would be a signal that an already troubled relationship is going to get worse. Certainly there are some economic benefits that flow to the North from Kaesong – those would obviously stop, but there are also economic benefits that flow to South Korean manufacturers from that project and those would stop as well and I think that would be unfortunate for both sides.


1. What do you think North Korea’s over-arching goal is right now with the latest rhetoric and threats surrounding the potential closure of the Kaesong Industrial Complex (the last outpost of inter-Korean cooperation)?
Andrei Lankov : I think their goals have not changed, we should remember that they have not done anything so far that they do not usually do. First, they want to remind the world – especially D.C. – about the threat they constitute. They hope that in so doing, they will strengthen the position of those who want to engage with them. They hope ultimately to get aid for what they are doing now. In the past, such a policy worked very well, but recently it has become less successful – but may still work.

Second, they care about the domestic audience. Contrary to what some may believe, I suspect that there has been a serious erosion in the regime’s popular support. Nothing helps to ensure docility and obedience as much as talk about a foreign threat. Eventually, when the threatened American invasion yet again fails to materialize, it will be presented as another victory for the young boy Marshall.

Leonid Petrov: This measure is designed specifically to annoy Seoul and other investors with a hidden agenda that shows that money plays very little or no role for North Korea.

The external message is: “Do not link your economic projects with denuclearisation! Our nuclear and rocket programs are not negotiable.”

The domestic message is in the same vein: “Economic cooperation with the enemy will not lead to reform or opening up”.

Michael Madden: The closure of Kaesong Industrial Complex will require the inter-Korea relationship to start from scratch; essentially reinventing the wheel. Given the recent rhetoric and activities of the new Park Geun-hye Administration in Seoul, Pyongyang has written Kaesong off as a legacy of the Kim and Roh Administrations and sunshine policies. They are also indicating that closure of Kaesong may not have the drastic effect on North Korea’s foreign currency earning activities, as is commonly claimed. The threat also creates political pressure on the South Korean Administration from the business owners and South Korean employees, which was reported by Yonhap the day after the DPRK issued its statement threatening to close the complex.

I would also add that Pyongyang may be willing to forego the lucrative revenue from Kaesong and make up for their losses either from increased tourist monies, the continued development of the Rason Industrial Complex and any other foreign trade it may be conducting.

This current spat over Kaesong is the 2013 incarnation of the closure of Mt. Kumgang, and it represents that in addition to rejecting the armistice agreement, North Korea is also rejecting the last vestiges of the Sunshine Policy.

Despite everyone’s concern, the South Korean market doesn’t seem to be shook up at all:

UPDATE: April 6, 2013
Slowly but surely, South Koreans in the complex have been returning. Today, another 100 have returned, and about 500 are estimated to still be in the complex.


13=阝12=口 J=丁 (阿)
L=氵 Z=工 (江)
–1312JLZ (阿江)
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