Kaesong, North Korea
Once touted as North Korea’s “best hope” for establishing relations with the western world, the Kaesong Industrial Complex (KIC), a factory park run jointly with South Korea some six miles north of the DMZ, was recently closed in response to Pyongyang’s latest string of advanced nuclear and long-range missile tests. In a sudden move, South Korean President Park Geun-hye suspended all business activity in the KIC, quickly evacuating the 184 South Korean factory managers stationed there. This was the first time that South Korea unilaterally closed the complex, with operations suspended only once before, in 2013, when North Korea recalled its workers in protest of joint US-ROK military exercises. As tensions mount, this closure could be Kaesong’s last.
A symbol for North-South cooperation, the Kaesong Industrial Complex was established in 2004 under the “Sunshine Policy,” former President Kim Daejung’s abortive attempt at fostering reunification. Kaesong — the former dynastic capital of a unified Korea — has until now been host to over 120 South Korean firms, employing approximately 54,000 North Korean workers. In exchange for total annual wages of over $100 million USD, investors tapped into a vast pool of well-educated, Korean-speaking labor, disciplined and tightly controlled by Pyongyang’s regime. Although monthly wages averaged a meagre $144 per worker, the benefits and working conditions were quite desirable for the average North Korean. Without a doubt, these workers will be impacted immensely by KIC’s closure, but South Korean firms will lose much as well.
The businesses most affected by Park’s decision are small-and-medium sized enterprises that relied on cheap, regional labor. The largest “Chaebol,” corporate conglomerates (Samsung, Hyundai, and LG included) have long steered clear of the risks associated with Kaesong, instead employing labor overseas — largely in China and Vietnam. Consequently, there has been a public outcry from firms with stake in Kaesong, and many now face the risk of bankruptcy. When the KIC was closed in 2013, firms reported a combined loss of over $869 million within the span of five months. This time, however, damages are estimated to be even greater, considering the growth of regional investment since 2013. Some analysts question the efficacy of Seoul’s decision to cease operations in Kaesong, even labelling the move “a shot in the foot.”
Although costly, the KIC’s closure was necessary for enforcing sanctions on North Korea. When the closure was first announced, South Korea’s Minister of Unification accused North Korea of funneling over 70% of wages paid through the region to “nuclear and missile development, idolization and luxury goods.” The ministry soon retracted this statement, after failing to produce clear evidence on the matter. However, critics of the closure argue that, even if the full $100 million in annual wages went to funding nuclear weapons, that amounts to less than 1 percent of North Korea’s total annual foreign trade. In response, one need only ask whether it’s acceptable for even $1 million to go towards nuclear development. The fact is: the KIC provided sanction-exempt economic stimulus to Kim Jong-un’s regime. President Park has adopted a suitably hard stance; in fact, one that marks a fundamental shift in her policies toward North Korea.
When elected in 2012, Park espoused a rhetoric of “Trustpolitik,” a platform built on normalizing inter-Korean relations through small-scale projects such as the Kaesong Industrial Complex. In doing so, the two countries would build trust as prescribed by her administration’s three-stage plan for peaceful unification: establishing 1) sound military peace, 2) economic integration, and finally 3) political integration. After over a decade of joint-industrial relations, the problem with Kaesong, it seems, was its attempt at economic integration before peace was ever certain. To date, North Korea has conducted four nuclear tests — every single one administered after the tenuous establishment of “peaceful operations” in Kaesong. Now, as reports emerge of a possible fifth test in the ensuing months, President Park announced that closing Kaesong was “just the beginning.” Her administration is prepared to ditch “Trustpolitik” altogether.
On Tuesday, Park stated in an address to the National Assembly that South Korea can “no longer expect the North Korean regime to change,” vowing to focus all efforts on pressuring Pyongyang to the point of regime collapse. Park’s administration expressly intends “to create an environment where the North cannot survive with its nuclear development.” She reiterated how wages paid through Kaesong to North Korea were likely used for “nuclear and missile development, instead of the livelihood of ordinary North Koreans.” As it stood, 30% of wages were guaranteed to the North Korean regime, but all of the wages were funnelled through Pyongyang with the expectation that agreed-upon wages be paid to workers. Although it was long proposed in the South Korean National Assembly that direct payment systems be established in Kaesong, such measures never came to fruition.
It’s a shame, but this is an all-too-familiar situation for Seoul. Whether it be Park’s “Trustpolitik” or Kim Dae-jung’s “Sunshine Policy,” mutual cooperation has been a critical prerequisite for constructive interstate relations. Unfortunately, these policies presupposed a degree of respect that has never been reciprocated by Kim Jong-un or his politburo. Now with intelligence reports warning of terrorist activity ordered directly by Kim Jong-un himself, the South should embrace this new direction of foreign policy, and ask: what more has it received for cooperation with Pyongyang? The same retaliation and saber-rattling? How about the whole-hearted threat of a nuclear program?
Andy Kim is a senior in the School of Industrial & Labor Relations at Cornell University, minoring in English and Creative Writing.