The Gaeseong Industrial Complex, which was reopened after months of suspension amid a tense inter-Korean standoff, is facing another crisis. This time, the situation may be more serious than ever.
The Unification Ministry confirmed that three South Korean firms have decided to discontinue operations in the inter-Korean factory zone in the face of uncertain business prospects following the five-month operational halt. They signed contracts to sell their factories and land to other companies at the last remaining symbol of cross-border cooperation.
Seven other firms, which had leased land to build factories, reportedly informed the Export-Import Bank of Korea of their decision to give up their business plans. Also, there are rumors that nearly 20 other companies may opt to withdraw from the industrial zone in mid-November because of their failure to pay back insurance funds they received from Seoul.
The reason is simple and clear ― apart from the sharp cut in client orders due to the suspended operations, North Korea might close the jointly-run complex again at any time. This reflects companies' serious doubts about the long-term competitiveness of the industrial zone amid the reclusive state's insincerity in improving its operation.
An investment seminar, which was scheduled for late October to attract foreign investors, has been postponed because of a deadlock in negotiations with North Korea to address problems in entry, communication and customs clearance. The recalcitrant regime in Pyongyang has also turned a deaf ear to Seoul's repeated call for guaranteeing the prevention of another shutdown.
Most worrisome is that the exodus of South Korean firms from the Gaeseong complex can be explosive amid the grim outlook on its future. In fact, companies there are operating at about 50 percent capacity and the number of North Korean workers has dropped to about 43,000, 20 percent fewer than what it was before the April suspension, due to reduced work.
Given that the factory park is a litmus test to gauge the safety of foreign investment, the North needs to do what it can to win the confidence of South Korean companies operating there. Specifically, Pyongyang ought to make good on its promises when it agreed to reopen the complex with Seoul. If not, foreign investors will turn away from North Korea once and for all.
The North holds the key to rebuilding its moribund economy, and this can start with its implementation of substantial trust-building measures. One of these measures can be for the communist country to declare to the world that the Gaeseong industrial park won't be suspended under any circumstances in accordance with its strict principle of separating economic matters from politics.
The Unification Ministry confirmed that three South Korean firms have decided to discontinue operations in the inter-Korean factory zone in the face of uncertain business prospects following the five-month operational halt. They signed contracts to sell their factories and land to other companies at the last remaining symbol of cross-border cooperation.
Seven other firms, which had leased land to build factories, reportedly informed the Export-Import Bank of Korea of their decision to give up their business plans. Also, there are rumors that nearly 20 other companies may opt to withdraw from the industrial zone in mid-November because of their failure to pay back insurance funds they received from Seoul.
The reason is simple and clear ― apart from the sharp cut in client orders due to the suspended operations, North Korea might close the jointly-run complex again at any time. This reflects companies' serious doubts about the long-term competitiveness of the industrial zone amid the reclusive state's insincerity in improving its operation.
An investment seminar, which was scheduled for late October to attract foreign investors, has been postponed because of a deadlock in negotiations with North Korea to address problems in entry, communication and customs clearance. The recalcitrant regime in Pyongyang has also turned a deaf ear to Seoul's repeated call for guaranteeing the prevention of another shutdown.
Most worrisome is that the exodus of South Korean firms from the Gaeseong complex can be explosive amid the grim outlook on its future. In fact, companies there are operating at about 50 percent capacity and the number of North Korean workers has dropped to about 43,000, 20 percent fewer than what it was before the April suspension, due to reduced work.
Given that the factory park is a litmus test to gauge the safety of foreign investment, the North needs to do what it can to win the confidence of South Korean companies operating there. Specifically, Pyongyang ought to make good on its promises when it agreed to reopen the complex with Seoul. If not, foreign investors will turn away from North Korea once and for all.
The North holds the key to rebuilding its moribund economy, and this can start with its implementation of substantial trust-building measures. One of these measures can be for the communist country to declare to the world that the Gaeseong industrial park won't be suspended under any circumstances in accordance with its strict principle of separating economic matters from politics.
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