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2009/05/21 10:58 KST
NORTH KOREA NEWSLETTER NO. 55 (May 21, 2009)

   *** TOPIC OF THE WEEK (Part 1)

Pyongyang Scraps Kaesong Contracts, Seoul Calls for 'Unconditional' Talks

SEOUL (Yonhap) -- The fate of a South Korean-run industrial complex in North Korea faces the possibility of collapse after North Korea unilaterally scrapped all business contracts and agreements governing the project last week. Seoul has urged Pyongyang to unconditionally return to the dialogue table to discuss issues related to the troubled Kaesong complex, including a South Korean worker detained there for over a month, requests that have so far been rejected.

   The two Koreas met for the first time in over a year amid frayed political relations on April 21 at the request of Pyongyang, which demanded wage hikes for its workers at the complex as well as higher land use fees. Seoul has since made two requests for follow up talks after the April meeting ended with little progress in bridging the two sides' differences. Experts speculate the North's recent demands reflect its dissatisfaction with the hardline policy of Seoul's Lee Myung-bak administration.

   North Korea declared on May 15 that all contracts and agreements regarding the Kaesong complex were now void. "We declare null and void the rules and contracts on land rent, wages and all sorts of taxes..." the North's Central Special Zone Development Guidance General Bureau, which is in charge of the joint park, said in a statement carried by the official Korean Central News Agency. It also said that it was unilaterally raising wages for North Korean workers and that it would begin collecting land use fees, warning that those South Korean companies that would not accept the new terms should leave.

   "The enterprises and personnel... of the south side in the KIZ (Kaesong Industrial Zone) should unconditionally accept the above-mentioned matters and we do not care about them leaving the KIZ if they have no will to carry them out," the statement read. "We can not show favor for an indefinite period to those who seek confrontation with fellow countrymen."

   Seoul quickly denounced the move. "Notifying the other side of a unilateral decision and telling them to either accept it or leave the country is simply unacceptable," an official told reporters, adding that Seoul was willing to discuss the issues with North Korea as long as their demands were reasonable. "North Korea has yet to suggest any specific numbers, so we still have to discuss it with our firms... but the firms will only agree to remain in Kaesong as long as they believe they can still make a profit by operating there," he said.

   The official also stressed that Pyongyang must be willing to openly discuss all related agenda items, including the detained South Korean worker, if they are sincere in trying to save the troubled business project. Yu Song-jin, an employee of Hyundai Asan, the South Korean developer of the Kaesong complex, was detained on March 30 for criticizing Pyongyang's political system and attempting to incite a female North Korean employee at the complex to defect. The North has since refused to grant South Korean authorities or family access to the detained worker.

   North Korea sent a letter in early May urging Seoul to quickly set the date for the second round of talks over the fate of the complex. Seoul's delegation traveled to Kaesong on May 12 to arrange the next meeting, but differences over the agenda thwarted their efforts. Seoul's initial proposal to meet on May 15 was flatly rejected by Pyongyang, which accused the South of attempting to add irrelevant issues to the agenda, namely the detained Kaesong worker. Seoul offered a second proposal for talks to be held on May 18 but received no response from Pyongyang.

   In his comments, the official asserted that the safety of South Korean employees at Kaesong was the most important issue and that it was "inseparable" from other issues regarding the joint economic project. "We could consider their demands if North Korea agrees to first sit with us and discuss all the related issues, but we cannot accept their position that the detained worker cannot even be on the agenda," he said.

   Despite Pyongyang's recalcitrance, however, Seoul says it will not shut down the embattled complex. Seoul's unification minister said as much on May 18, insisting that South Korea was not considering closing the joint venture. Hyun In-taek also said Seoul would make another offer for talks with the North despite earlier rejections. "The Kaesong industrial complex is now in a time of crisis. But our government will make utmost efforts to ensure its stable development," Hyun said in an opening speech at a local forum. He called the joint venture "the last-remaining hope for the future (of inter-Korean ties) amid political and military rigidness."

   The Kaesong complex, just an hour's drive from Seoul, is the last surviving inter-Korean venture that opened in late 2004 as an outcome of the first inter-Korean summit between then South Korean President Kim Dae-jung and North Korean leader Kim Jong-il four years earlier. Other cross-border ventures -- including tour programs to scenic North Korean sites -- were shut down as relations dissolved last year following the inauguration of the conservative President Lee. More than 100 small South Korean firms operate in Kaesong, matching their capital and technology with the cheap but skilled labor of nearly 40,000 North Korean employees.

   North Korea initially requested inter-Korean talks over the joint venture last month, the first such proposal in more than a year. But, as noted, the April 21 meeting ended in less than half an hour due to tussling over the agenda. Minister Hyun reiterated Seoul's position that "the matter of Yu is a fundamental issue to the Kaesong park" and will make another proposal for talks "at an appropriate time."

   The joint venture has often fallen victim to souring political relations since Lee took office in February with a tougher stance on North Korea's nuclear program and ending Seoul's unconditional flow of economic aid to the North previously supported by his liberal predecessors for a decade. North Korea has curtailed and sometimes banned South Korean traffic to the joint venture in retaliation.

   Seoul maintains a 5 billion won (US$3.9 million) insurance plan to cover compensation for the firms' losses in case the complex is shut down for political reasons. The government and the firms invested a total of $26.86 million to develop the park, according to the ministry, about $26 million of which in wages was wired to North Korean government accounts last year.

  (END)