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NORTH KOREA NEWSLETTER NO. 119 (August 12, 2010)

S. Korea Agrees to Pay Raise for N. Korean Workers at Joint Complex

SEOUL (Yonhap) -- South Korea has agreed to raise the minimum monthly wage for North Korean workers by 5 percent at the two countries' joint factory park in the socialist state, an official said on Aug. 6.

   The latest increase, which was agreed to Aug. 5 and will be effective over the next year, is in line with the 5 percent annual hike in the preceding three years, Unification Ministry spokesman Chun Hae-sung said in a briefing, adding the minimum wage for North Korean workers now stands at US$60.775.

   North Korea has demanded wage hikes for its workers in the border town of Kaesong since early this year. About 120 South Korean firms operate there, employing 44,000 North Korean workers to mainly produce labor-intensive goods. The estate has been considered the last remaining symbol of reconciliation between the sides that remain technically at war.

   "Our companies agreed to allow the increase, and we have also agreed it would be appropriate to increase the minimum wage by 5 percent, after hearing opinions from the firms," Chun said.

   Under an agreement with North Korea, South Korea may increase the minimum wage by up to 5 percent each year. The new raise will be effective for one year starting Aug. 1, Chun said.

   The increase comes as tension simmers between the two countries, which fought the 1950-53 Korean War that ended in a truce that has never been replaced by a peace treaty.

   Following the deadly sinking of a South Korean warship near the Yellow Sea border between the two sides in March, Seoul has demanded an apology from Pyongyang and is holding a massive five-day anti-submarine drill in the area this week. The North, which denies its role in the sinking that killed 46 sailors, has threatened "strong physical retaliation."

   In a related development, South Korean government officials said Friday that Seoul and Washington have recently conducted war games to prepare for possible South Korean hostage situations in Kaesong.

   South Korea has halved the number of its nationals staying in Kaesong due to safety concerns since May, when it warned it would not tolerate any North Korean threat or harm to them.

   The Kaesong complex began operating in 2004 after being agreed upon by the leaders of the Koreas in a summit four years earlier. The companies there have expressed concerns that the erosion in inter-Korean relations was affecting their businesses, calling for eased regulations on their operations.


Inter-Korean Trade Falls More Than 30 Percent Amid Heightened Tensions

SEOUL (Yonhap) -- Inter-Korean trade has fallen more than 30 percent since the South cut almost all business relations with the North after Pyongyang was blamed for torpedoing one of its naval ships in late March, the customs office in Seoul said on Aug. 6.

   According to data provided by the Korea Customs Service in Seoul, the trade between the two Koreas came to US$123.06 million in June, down 32 percent from April, when they still kept their ordinary business relations despite a probe into the naval disaster.

   In May, a multinational team of investigators released a report proving that North Korea torpedoed the South Korean warship Cheonan on March 26 near their western maritime border, killing 46 sailors. The North has denied any involvement.

   In response, the Seoul government suspended almost all business relations with Pyongyang on May 24 with the exception of the industrial complex in the border town of Kaesong, where South Korean firms are doing business in cooperation with workers from the North.

   South Korea's exports to the North amounted to $56.88 million in June, down 27 percent from April, while imports decreased 36.5 percent to $66.18 million over the same period, the data showed.

   Inter-Korean trade also dropped 21 percent from May, with its exports to and imports from the North falling 4 percent and 32 percent, respectively.

   Despite such a sharp shrinkage, the customs office said the decline was not as steep as expected thanks to the Kaesong complex, which takes up most inter-Korean trade.

   "The reason why the decline was not as sharp as expected is because we still keep a trade channel open in the Kaesong complex, which accounts for around 70 percent of total trade with the North," a customs official said.

   South Korea is the North's second-largest trade partner after China. A suspension of inter-Korean business would cause a significant impact on the efforts of the reclusive communist nation to secure cash, according to experts.

   Earlier, a state-run think tank in Seoul said inter-Korean trade suspension could cost North Korea about $280 million annually, adding to pressure on the North's cash-strapped regime in governing its country.

   The two Koreas remain technically at war as their 1950-53 conflict ended in a truce, not a peace treaty.


Seoul Lauds Its Managing of Inter-Korean Ties Last Year Amid Tension

SEOUL (Yonhap) -- Seoul recently gave a positive self assessment on its handling of relations with North Korea last year despite sustained tension and skepticism over its management of exchanges with the socialist neighbor.

   In a Aug. 10 report submitted to the National Assembly on its performance review for fiscal year 2009, the Unification Ministry said that it has "stably managed the South-North relations and the situation on the Korean Peninsula," according to government sources.

   The ministry assessed that it has dealt with the North's long-range rocket firings, nuclear experiments and other hard-line actions in a calm and firm manner.

   It added that Seoul "dealt flexibly (with the North) so that the South-North relations and the situation of the Korean peninsula would not deteriorate."

   The report noted that the government accomplished "800 percent" of its initial annual goal in fostering a foundation for a Korean Peninsula peace regime, citing its acceptance of North Korean mourners during the funeral for late President Kim Dae-jung and cross-border talks such as prevention of flash floods from the North.

   Such view, however, has been met with skepticism in light of a clear exacerbation of relations between the two Koreas, most notably after a deadly exchange of naval fires near Daecheong island in November of last year and the sinking of the Cheonan, a South Korean navy corvette, in March.

   The Institute for Peace and Unification Studies (IPUS), affiliated with Seoul National University, said on August 10 that its Inter-Korean Integration Index (IKII) stood at 198.6 out of a total of 1,000 in 2009, down from 209.5 in 2008.

   The index rose to an all-time high of 272.7 in 2007 when the late former President Roh Moo-hyun met with North Korean leader Kim Jong-il. The index has dropped for the second straight year since President Lee Myung-bak took office the following year.

   The institute said inter-Korean relations in 2009 were at their lowest in years as a result of the North's nuclear bomb test, their detention of a South Korean worker at the Kaesong complex and the Lee administration's tough stance against the socialist state.

   "A further freezing of ties may bring about an exhaustion of power for unification. We will have to pay a huge cost for the uneasy relations and the current government's policy in advancing the nation and globalization will be hindered," Park Myoung-kyu, head of IPUS, said.