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Industrial Park Dispute Highlights North Korea's Economic Dilemma

North and South Korea are locked in a dispute over the future of a joint industrial park that was designed to pave the way to friendship. With North Korea holding a South Korean executive in isolation, and cancelling the factory zone's contracts, some South Koreans are calling for the park to shut down. The dispute highlights North Korea's dilemma of political isolation and economic dependency.

South Korean officials say they have still heard no answer back from North Korea on their request for formal talks on the embattled Kaesong Industrial Complex. The zone, located just inside North Korea over its border with the South, was originally intended as an experiment in peaceful cooperation between the cold war rivals. Now, however, it is teetering near the brink of total closure due to fundamental challenges to its operations.

North Korea has held a South Korean executive who helps manage the zone incommunicado for nearly two months now. Last week, Pyongyang also tore up the basic contracts that govern land use, wages, and other fees in the zone. South Korean officials say the indefinite detention, and the North's unilateral dictation of payment terms, are both unacceptable.

Yoo Chang-Geun, is the vice chairman of the Gaesong Industrial Council. Like other council members, he is one of about 100 South Korean busioness owners who take advantage of Kaesong's cheap North Korean labor. He says the dispute is taking its toll.

He says the health of the business owners is suffering, due to the intense pressure. Several managers have spent time in the hospital recently, he says-- including himself.

South Korean businesses in the Kaesong zone employ more than 30,000 North Koreans, who manufacture basic consumer goods like sneakers and cosmetics. But some companies say their customers are putting orders on hold - afraid they will not be able to get on-time delivery due to the dispute. Several conservative political leaders have called on Seoul to either shut down Kaesong operations, or pull out the South's personnel, due to safety concerns.

Vice chairman Yoo shudders at the thought of that. He says many South Koreans have laid their entire assets on the line in the Kaesong zone, and it would be impossible for them to pull out without serious compensation from the government. He says, in that sense, they have become a sort of hostages of the Kaesong zone.

Yang Moon-Soo, a professor at Seoul's University of North Korean Studies, says the Kaesong zone represents what leaders in Pyongyang call the "yellow wind" of capitalism - a potentially corrupting force on North Korea's unique brand of communist ideology. He says the North may have decided the zone is not worth the risk.

He says North Korea may deliberately be raising costs so that businessmen have no choice but to pull out and relocate to China and Vietnam. Then, he says, it would look like South Korea's fault when the zone closes.

Yang says Kaesong is symbolic of the core dilemma faced by North Korean officials. On the one hand, they require isolation from outside information and influence, to ensure control of the population. On the other hand, they have no choice but to form ecnomic partnerships, given North Korea's severe impoverishment.

Still, Yang says closing down Kaesong holds its own risks for the North.

Closing the zone, he says, could create political unrest among the tens of thousands of North Koreans who have come to rely on a steady income and regular meals. He also points out the Kaesong zone was created at the direct order of North Korean leader Kim Jong Il. Reversing the "Dear Leader's" order, Yang says, could create political liability.