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NORTH KOREA NEWSLETTER NO. 257 (April 11, 2013)
*** TOPIC OF THE WEEK (Part 2)

N. Korea Suspends Operations at Inter-Korean Joint Industrial Complex in Kaesong

SEOUL (Yonhap) -- Operations at the inter-Korean joint industrial complex in Kaesong came to a complete halt on April 9 for the first time since the complex began operation nine years ago as North Korean laborers did not show up for work.

   North Korea announced the previous day that it would pull out all of its laborers in protest of "South Korean provocations." Pyongyang claimed that Seoul was using Kaesong, a symbol of economic cooperation between the two Koreas, as a pretext for igniting war.

   South Korea reaffirmed its stance after the pullout stating that the complex should operate as usual and urged the North to normalize operations.

   In a Cabinet meeting on April 9, President Park Geun-hye said that North Korea should stop with its negative behavior and make proper decisions for the sake of the future of the Korean people.

   Park said that it is "very disappointing" that North Korea has decided to suspend operations of the jointly run factory complex in Kaesong city.

   "It is very disappointing that North Korea abruptly said yesterday that it will temporarily suspend the operations of the Kaesong Industrial Complex that has been operating without any problems," Park said.

   "How long should we see this endless vicious cycle of (North Korea) creating crises before reaching a compromise in exchange for aid and again creating crises before compromise and aid?" she said of Pyongyang's pattern of behavior.

   Unless operations of the complex are normalized, South Korea will have to use state funds earmarked for inter-Korean exchanges and cooperation projects to compensate companies for damages arising from the suspension, Park said.

   A South Korean Unification Ministry official said all 53,000 North Korean workers, except for some 200 security personnel, did not show up for work on April 9 as North Korea instructed the day before.

   "All manufacturing sector workers did not report to work, although security personnel hired to guard factories, and North Korean administrative personnel at the Kaesong Industrial District Management Committee showed up for duty," said the official who declined to be identified.

   He added that the North did not schedule bus services to transport workers to the complex, which is located just north of the demilitarized zone (DMZ) that separates the two Koreas.

   The official added that Seoul will never close down or withdraw from the joint venture and will continue to emphasize that the actions taken by the North are unacceptable and should be reversed.

   "South Korea's stance remains resolute on this matter," the official stressed, highlighting that Kaesong should be looked at in terms of the future of South-North relations.

   Previously, North Korea temporarily prevented South Korean officials and workers from entering Kaesong twice in 2009, but the communist country had never taken steps to halt operations.

   North Korea's decision to suspend operations of the joint industrial park is a tactic of brinkmanship designed to pressure South Korea to change its policies, North Korea watchers in Seoul said.

   "By raising tensions, the North may be trying to pressure the South to alter its policies that have shown no real signs of accommodating Pyongyang," said Chang Yong-seok, a senior researcher at the Institute for Peace and Unification Studies at Seoul National University.

   North Korea is using remarks made by South Korean Defense Minister Kim Kwan-jin about a military contingency plan in case South Korean nationals are held hostage in Kaesong and South Korean media's report describing the North's recent behavior as a "brinkmanship tactic" as pretext for the suspension of the complex.

   "Defying the repeated warnings of the DPRK, the South Korean confrontation maniacs are letting loose a string of invectives hurting the dignity of the DPRK, talking about 'source of money,' 'detention' and 'hostages.' South Korean Defense Minister Kim Kwan-jin revealed his sinister intention to introduce a special unit of the U.S. forces into the zone, vociferating about an operation for rescuing hostages," Kim Yang-gon, secretary of the Central Committee of the Workers' Party of Korea, said in a statement while announcing the decision to suspend the Kaesong complex.

   "This goes to prove that the South Korean warmongers seek to turn the zone into a hotbed of war against the DPRK," Kim argued, adding that "This situation can no longer be tolerated."

   South Korean experts said that the North uses the attitude of the South Korean government or media reports as the reasons for escalating tension on the Korean peninsula but they are just "pretexts." North Korea is increasing tensions in accordance with its premeditated plans.

   "After all, North Korea is intending to drive inter-Korean relations to extreme confrontation," said Yang Mun-su, professor at the University of North Korean Studies.

   The Kaesong complex was created after the two sides signed an agreement calling for its creation in August 2000 with its groundbreaking ceremony taking place in June 2003 and the first goods being produced there in late 2004. The South has invested 900 billion won (US$802 million) into Kaesong so far with output reaching $469.5 million worth in goods as of 2012, despite chilly South-North Korean relations.

   The suspension of the industrial park will deal a blow not only to South Korean businesses operating there but to North Korea as well.

   A total of 123 South Korean companies employ 53,000 North Koreans at the industrial park, which produces around US$40 million worth of goods every month. South Korean companies pay the workers a total of $87 million per year in salaries.

   Officials of the South Korean companies operating in the joint factory park said they could go bankrupt by the suspension and urged the two sides to get the complex back up and running.

   "The companies could go bankrupt if the current situation persists," Yu Chang-geun, vice president of the Association for South Korean companies in the Kaesong complex, said in a news conference in Seoul.

   On potential damages, Cho Bong-hyun, an analyst at the IBK Economic Research Institute, said based on past data, if the complex is shut down and companies at the zone go bankrupt, economic damages could reach 6 trillion won (US$5.2 billion).

   The shutdown could put a burden on the North as it will strip the impoverished country of a key legitimate cash cow while the families of the 53,000 North Korean laborers at the complex will lose their source of income.

   Last year, South Korea funneled $80 million to the North, mostly as wages for the North Korean workers at the South Korean firms in Kaesong, according to the Unification Ministry.

   Reflecting Seoul's resolve not to give up on the complex, Minister of Unification Ryoo Kihl-jae said in a forum meeting held at the National Assembly that the North should take immediate steps to allow for operations at Kaesong to resume.

   "The government will not succumb to threats and plans to voice its opinions on the negative actions taken by the North," the policymaker said. "If the North makes the wrong move, Seoul will respond in an appropriate manner."

   The minister said the North should accept the cross-border confidence-building measures proposed by President Park, and if it accepts such calls, Seoul and the rest of the world will do its utmost to help the North.

   President Park said that the government will have to use state funds meant to facilitate inter-Korean exchanges and cooperation to compensate the South Korean companies, unless operations of the factory complex are normalized. She did not elaborate on details.

   South Korea has set aside 1.97 trillion won as the state funds this year, up 9.1 percent from a year ago. Other government sources said companies at the Kaesong complex that suffer losses will be covered to some extent by the special insurance policy set up for companies operating in the zone.