A wage dispute underway at the Kaesong joint industrial zone in North Korea could end the last remnant of South Korea’s Sunshine policy of engagement with the North.
Kaesong, a symbol of inter-Korean cooperation, has become a point of contention over cheap labor and concerns that it is being used to bypass sanctions.
The current wage dispute at the Kaesong Industrial Zone in North Korea seems trivial on the surface, but it is indicative of how inter-Korean relations have deteriorated.
Pyongyang recently raised the monthly minimum wage for its workers there from $70.35 to $74. Officials in Seoul have objected to this relatively small -- 5 percent -- pay raise because the decision was made unilaterally in Pyongyang.
Small, yet important, detail
Professor Andrei Lankov, a North Korea analyst with Kookmin University, said that even on this small matter it is important for Seoul to demand that North Korea adhere to the previously agreed upon negotiation process to determine wages.
“Money itself is almost irrelevant because the total sum they are arguing about is nearly comical. However, they don’t want to create a precedent and, in a sense, their position is understandable,” said Lankov.
The Kaesong Industrial complex located just north of the border from Seoul was conceived over a decade ago as an economic assistance and cooperative project to build trust between the divided Koreas. It is the only major project still in operation that was part of the late South Korean President Kim Dae-jung’s Sunshine policy of engagement.
The other major joint project was the Keumgang Mountain tourist zone. It was shut down in 2008 after a North Korean soldier shot a South Korean visitor.
Other South Korean aid programs were halted and sanctions imposed against North Korea in 2010 after Seoul accused Pyongyang of sinking a South Korean warship and killing 46 sailors.
More than 100 South Korean factories now operate in Kaesong and they employ 50,000 North Koreans. But Kim Jin-hyang, a professor at the Korea Advanced Institute of Science and Technology, said the project now reflects the strained state of inter-Korean relations.
He said the characteristics and reputation of the complex have turned from reconciliation, cooperation and peace to distrust and confrontation, and it has changed from a shared place to the North’s place.
Rather than a catalyst for engagement, Kaesong has settled into a sometimes contentious economic arrangement that benefits both sides. South Korean companies get a cheap labor force, one that earns a fraction of what South Koreans make, to compete with developing world industries that produce mostly shoes and clothing products.
Human rights groups have voiced concerns about worker exploitation in the industrial complex, where the Kim Jong Un regime retains a significant share of their wages and where there are few if any legal protections afforded to the workers.
Still, these are sought after jobs where workers earn more than most who live in the impoverished North.
There are also concerns that the industrial output helps North Korea ease the pain of international sanctions by bringing in needed capital to fund North Korea’s nuclear weapons program.
But Professor Kim said the economic impact of Kaesong, which brings in $90 million in wages each year, is overstated -- especially when compared with North Korea’s extensive business ties with China and Russia.
He said that when considering the size of the entire economy of North Korea, one can understand that Kaesong does not compensate for international sanctions.
Engagement on working level
Professor Lankov added that despite these shortcomings, there is still real engagement happening on the working level in Kaesong.
“There is a great deal of interaction. There is a great deal of personal connection formed in this area. If it is closed it means that the North will become even more isolated from the outside world, at least from South Korea,” Lankov said.
He said both sides still value the industrial zone as a symbol of progress for inter-Korean relations and expects the wage dispute to eventually be worked out.
The complex was shut down by Pyongyang for five months in 2013 in response to U.N. sanctions that were imposed after North Korea conducted its third nuclear test.
VOA Seoul Producer Youmi Kim contributed to this report.