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2009/12/24 10:52 KST
NORTH KOREA NEWSLETTER NO. 86 (December 24, 2009)

*** TOPIC OF THE WEEK (Part 2)

Two Koreas Wrap up Offshore Survey to Spur Industrial Park

SEOUL (Yonhap) -- South and North Korea recently completed an on-site inspection of factory complexes overseas in a bid to take a leaf from their book and help kick-start an inter-Korean industrial park whose operations have been sputtering due to chilly bilateral ties.

   The Dec. 12-22 trip to China and Vietnam came after the fate of the industrial park in the North Korean border town of Kaesong was left in limbo earlier this year amid worsening inter-Korean relations and Pyongyang's demands for a sharp hike in wages and land fees paid by South Korean firms.

   Debriefing on the rare mission, Seoul's chief delegate said on Dec. 23 that both sides want their joint factory park to become internationally competitive, though a number of issues remain unresolved.

   "As the joint inspection team inspected advanced factories in Chinese and Vietnamese industrial parks as well as their competitive products, the North Korean members expressed a wish to develop the Kaesong complex further," Kim Young-tak, a Unification Ministry official who led the South Korean team.

   A 10-member delegation from each side returned later on Dec. 22 after visiting several emerging industrial parks in China and Vietnam in an effort to find a role model for the Kaesong complex that opened in 2004.

   Their itinerary included visits to Chinese factories owned by such South Korean heavyweights as steelmaker POSCO Co. and to a Vietnamese handset plant operated by Samsung Electronics Co. The factories are located in Qingdao, an industrial port town in China's northeast, and in Suzhou, a hub for China's silk industry, as well as in Yenpong, a Vietnamese complex near Hanoi.

   During the trip, North Korean officials paid close attention to wage and insurance systems, and particularly to ways of preventing payment delays by investors, noting that wage payments for North Korean workers in Kaesong are often deferred by South Korean firms, Kim said.

   In contrast, the South side was more interested in infrastructure and safety issues, tax benefits and customs systems, he added.

   The joint survey, the third of its kind since the Kaesong park opened, has yet to produce any agreement on adjusting wages or follow-up meetings, Kim said. " "But we shared the view that there is a need for working-level officials related to the industrial complex to hold frequent discussions to help solve problems."

   The minimum monthly wage in surveyed factories in China and Vietnam was about US$100, though this is not comparable that of the Kaesong complex because of the difference in payment systems, the official added.

   South Korean firms pay an average of $80 a month to North Korean workers in Kaesong. The payments are made directly to the North Korean government.
North Korea had earlier complained of low wages and land fees paid by South Korean firms at the joint park, Several rounds of unsuccessful negotiations ensued, with North demanding a four-fold increase in the monthly wage for North Korean workers to $300.

   Analysts in Seoul said that though it has failed to produce any visible results, the joint survey is expected to provide fresh momentum to the joint industrial park and other inter-Korean business projects that have been sputtering.

   Earlier this year, South Korean firms operating there considered pulling out after the North sealed cross-border traffic several times and detained a South Korean worker, in what appeared to be a protest against the conservative Seoul government.

   North Korea shifted to a more conciliatory stance in August, reaching out to Seoul and Washington for dialogue and lifting restrictions on inter-Korean business ventures.

   But North Korean media again fired a broadside at Seoul in late November, pointing to its prolonged suspension of a lucrative North Korean mountain tour and its participation in a U.N. resolution condemning the North's human rights condition. The North called South Korean Unification Minister Hyun In-taek, who is in charge of inter-Korean relations, a "traitor" impeding cross-border relations.
The South Korean government suspended Hyundai's major tour program to Mt. Kumgang in North Korea's east coast after a North Korean soldier shot dead a South Korean tourist in July 2008, who allegedly strayed into an off-limits military zone.

   North Korea has rejected an on-site investigation into the shooting death in the North's eastern Mt. Kumgang resort. South Korea subsequently suspended the tour program indefinitely, rapidly sending Inter-Korean relations into a downward spiral.

   The Kaesong park started operations in late 2004 as a result of the historic first inter-Korean summit in 2000. Currently, 116 South Korean firms operate there with more than 40,800 North Korean workers, producing mostly labor-intensive goods such as electronics, clothing and kitchenware.

   The park's output in October reached $27 million, up 12 percent from $24 million a month earlier, according to the latest data by Seoul's Unification Ministry.