Gaesong Industrial Complex Faces Serious Threat
By Andrei Lankov
Korea Times columnist
Recent events once again attracted attention to the Gaesong Industrial Park, the large joint North-South cooperation project. Nowadays it faces a serious threat. It appears that the Pyongyang leadership decided to use it as a blackmail tool, so Seoul now faces a serious choice.
The project was launched in 2003 by the left-leaning Roh Moo-hyun administration, then in power in Seoul. It was the time of unprecedented thaw in North-South relations, and the park was meant to become an embodiment of the then powerful idea. If Southern capital and expertise can be combined with the Northern cheap labor, the Korean economy will become invincible.
The site for the future industrial park was chosen as merely a few miles from the DMZ checkpoint, in the vicinity of Gaesong, the second most important Northern city. In the park North Koreans are hired to do unskilled and semi-skilled labor at factories operated by South Koreans, small and medium firms. Big businesses from the very beginning were remarkably cautious about the project.
The South Korean investors are supported by government funds through numerous direct and indirect channels, so the project is be viable without South Korean taxpayers, even though this contribution does not appear too high if compared with the scale of the South Korean economy.
In spite of all the troubles, the number of employees was steadily growing, reaching 40,000. Initially, workers were recruited in Gaesong city, but now the majority of them come from adjacent townships. More than two hundred company buses zigzag the area, bringing people to the factories every morning.
Officially, North Koreans are paid monthly salaries of $70 to $80, but only a part of this amount actually reaches their pockets. Most of their salaries are taken by the authorities, so the workers receive merely $25 to $30 a month.
Thus, the opponents of the entire plan describe the park as a "slave labor camp". This might sound plausible ― unless you know that the average monthly wage in North Korea is $2, so the park provides the best paid regular jobs in the North.
Competition is high, bribes are often paid to officials to secure employment, South Korean owners have no control over whom they hire and stories about exorbitant salaries paid by the Southerners are spreading across the country.
The park is, of course, an important source of income to the Kim family regime. Apart from salaries, the Pyongyang authorities also charge the South Korean side for land use. No doubt, this money helps to pay for the high-quality cognac which is known to be the favorite beverage of the North Korean top crust. While for the South Korean economy the park is a very marginal undertaking, for the North it has long been the major source of the hard currency income.
However, the industrial complex has another side as well. It brings a hitherto unprecedented number of North Koreans into direct contact with their cousins from the South.
No politics can be talked there, and all contacts are supervised by North Korean security agents. Nonetheless, when North Korean workers there observe the Southerners' dress, personal items and conversations, they come to realize that the official propaganda is even less honest than they suspected. If one takes into consideration the family members and related personnel, including even secret police overseers, some 200,000 North Koreans are regularly exposed to the life of the South via the complex. Therefore, even though the sort-term gains seem to favor the North Korean regime, in the long run the project steadily undermines its power base.
However, in early 2008 the right-leaning Lee Myung-bak administration replaced Roh's government after a landslide electoral victory. The new administration stated that it would demand more reciprocity in the relations between the two Korean states. These expectations were hardly realistic, but the North reacted with exceptional harshness. Kim and his henchmen clearly decided to teach Seoul a lesson, demonstrating that engagement with the North will be possible on their conditions only, that no amount of aid and concessions will be translated into political leverage.
Within a few months, nearly all major cooperative projects were stopped, with the industrial park becoming the only surviving North-South economic project. Obviously, it happened because the North Korean leaders are too happy with the money they are getting. Nonetheless, they are also looking for blackmail tools which can be used to press Seoul, and they obviously hope that Gaesong might become one such tool.
The first attempt of this kind took place last November. The North Korean authorities expressed their indignation about the human rights groups who were sending to the North balloons with leaflets critical of the Kim's regime.
Pyongyang came out with an ultimatum. Unless South Korean authorities ban the activity, there will be ``grave consequences" for the park. It was an obvious hint that the project would be closed soon.
The North Korean analysts understand that economically the complex is not important. However, the South Korean public, while being generally indifferent to the North Korean issue as such, expects from any South Korean president an ability to handle the North Koreans, avoiding confrontations which have an adverse albeit marginal effect on the Southern economic situation.
However, the Lee administration did not blink and made clear that this time it would not succumb to the habitual North Korean blackmail. Obviously, the North Korean honchos made some calculations and came to the conclusion that a closure of the project would have grave consequences for their own pockets.
So, in December they introduced only limited measures. The number of North Korean managers was reduced to 880 from some 1,700, the cross-border train service was discontinued, but the actual scale of operations and number of North Korean workers increased.
However, it seems that Pyongyang strategists have not completely lost their belief in the blackmail potential of the complex. A new wave of blackmail began this April. First, the North Korean authorities detained a South Korean manager surnamed Yoo, who allegedly was making critical remarks about the North Korean regime and also plotted the escape of a worker. Soon afterwards, North Korean officials warned that they expect land use fees and wages to be increased and paid in 2010, instead of the previously agreed upon payment date of 2014. This contradicts all earlier agreements, but it has long been known that agreements with Pyongyang are hardly worth the paper they are written on.
So, pressure is increasing and South Korean authorities now face a dilemma.
On one hand, in the long run the complex is one of the best things which ever happened in North-South cooperation. It is unlikely that it will be profitable for the South in purely financial terms, and its contribution into local political stability is marginal albeit real. However, the complex is the only place where North and South Koreans work together, and it is also a place where countless encounters lead to the dissemination of knowledge about the South, gradually undermining the North Korean regime and laying foundations for a change in the North.
However, there must be clear limits on how far the South Korean government should go in order to save the complex under North Korean pressure. North Koreans are clearly looking for some leverage over the South, and it they come to see the park as a hostage project, they will it use to put forward escalating demands. If the South Korean government bows to the pressure and makes concessions, there is no doubt that in weeks or months Pyongyang manipulators will make new demands, probably more outrageous.
Therefore, one can hope that the project will survive. Nonetheless, it will become dangerous if Seoul, trying to save this important project, starts to succumb to Pyongyang's blackmail. So, the project should be supported, at a cost to South Korean taxpayers, but not at the cost of unprincipled political concessions.
The writer can be reached at anlankov@yahoo.com