South Korea to Shut Joint Factory Park, Kaesong, Over Nuclear Test and Rocket

[MikeWB]

This is probably the main source of revenue for NORKs. This shutdown can start a war.




SEOUL, South Korea — South Korea said on Wednesday that it would shut down an industrial complex that it runs jointly with North Korea, its strongest retaliation yet for the North's recent nuclear test and its launching of a long-range rocket over the weekend.

In announcing the decision, Unification Minister Hong Yong-pyo said the industrial complex in the North Korean border town of Kaesong, which went into operation in 2004, had wound up providing funds for the North's weapons programs.

Mr. Hong, the South's point man for negotiations on the North, said South Korea had informed Pyongyang of its decision and asked it to help the 184 South Korean factory managers at the complex to cross the border safely and return home.

Although the Kaesong complex was temporarily shut down in 2013, it was the North that initiated the closing, by pulling out its workers to protest joint South Korean-American military drills. The South responded by withdrawing its managers.


The South's announcement came as the United States and its allies were trying to persuade the United Nations Security Council to impose stronger sanctions against the North. South Korea and the United States have also said they will impose unilateral sanctions.

"We cannot stop North Korea's nuclear and missile programs with the existing methods of response," Mr. Hong said in a nationally televised statement. "We need to act strongly together with the international community to ensure that North Korea pay a price, and we need to take special actions to leave the North with no option but to give up its nuclear program and change."

Mr. Hong said the Kaesong factory park had been an important source of cash for the North Korean government. He said North Korea had earned more than $560 million in wages for its workers there, including $120 million last year. Businesses and the government from the South have also invested $852 million in factories, roads and other facilities there.

"In the end, it appears that the money was used not for the peace the international community wanted but to advance the North's nuclear weapons and long-range missiles," he said.

On Jan. 6, North Korea conducted its fourth nuclear test, which it claimed was of a hydrogen bomb, and on Sunday, it launched a satellite into orbit using a long-range rocket. Both actions were in defiance of Security Council resolutions banning the North from pursuing nuclear arms or ballistic missile technology.

The conservative South Korean government of President Park Geun-hye has responded by resuming propaganda broadcasts along the border and, despite China's opposition, agreeing to negotiate the deployment of an American missile defense system on its territory.


But Ms. Park's conservative supporters have been urging her to go further by shutting down Kaesong, the only industrial complex in North Korea that is jointly operated with investors from outside the country.

The Kaesong factory park began more than a decade ago as an experiment: combining South Korean manufacturing skills with cheap North Korea labor. It was the most important of a number of cooperative projects begun during a period of reconciliation between the Koreas, when the South hoped that increased economic exchanges would help ease mutual mistrust and, eventually, lead to the reunification of the divided Korean Peninsula.

But most of those projects, like a joint tourism venture at Diamond Mountain in southeast North Korea, have been abandoned during the past eight years, as the North's continuing nuclear arms development and occasional armed provocations, like the shelling of a South Korean island in 2010, have soured many South Koreans on the prospect of better relations.

Kaesong was the last of those joint projects still functioning and the most important symbol of inter-Korean good will. Streams of cars and trucks going to and from the complex crossed the otherwise tightly sealed border daily, carrying South Korean factory managers into the North and manufactured goods into the South. More than 45,000 North Koreans worked for 123 South Korean-owned factories at Kaesong last year, producing more than $515 million worth of textiles, electronic parts and other labor-intensive goods, according to the South Korean government.

But the wages, paid in American dollars, did not go directly to the North Korean workers. Instead, the Pyongyang government took the bulk of the cash, with the workers getting just a small fraction of their wages in the local currency, according to South Korean officials here. Conservative South Koreans and some American policy makers have long feared that proceeds from Kaesong have benefited the North's nuclear arms program.

Until now, Kaesong had continued to operate despite such misgivings. Its operations were suspended for five months after the North's third nuclear test in 2013, but they eventually resumed, with the Koreas agreeing to ensure that the complex would not be affected by "political situations under any circumstance."

Mr. Hong, the unification minister, said on Wednesday that the South had needed to take drastic action. He said the North's nuclear ambitions, if left unchecked, could set off a "nuclear domino effect" in the region, with other countries pursuing their own arms programs in response to the North's.

South Koreans who have argued for keeping Kaesong open said that cutting off trade with the North would only weaken Seoul's economic leverage and push Pyongyang closer to China. South Korea was once a major trading partner of the North, but almost all of the isolated country's trade now goes through China, which has resisted appeals from Seoul and Washington to use its influence to curb the North's nuclear ambitions.

Cheong Seong-chang, a senior analyst at the Sejong Institute in South Korea, said the shutdown of Kaesong was "the worst possible option" for the South. Economically, he said, it would do the North less harm than Seoul hoped, because the North could earn more cash by sending the same skilled North Korean workers to China. "When you look at the South Korean government's policies since the North's nuclear test, you cannot help thinking that it is reacting emotionally," Mr. Cheong said.

The Kaesong complex had been closed since Sunday for the Lunar New Year holiday; the South's announcement means it will not reopen on Thursday as planned. Most of the roughly 500 South Korean managers based at the complex are home for the holiday, but 184 are still in Kaesong, South Korean officials said.

http://www.nytimes.com/2016/02/11/world/asia/north-south-korea-kaesong.html

[MikeWB]

North Korea says South's pulling out of industrial zone 'declaration of war'

North Korea said it was kicking out all South Koreans from the jointly run Kaesong industrial zone on Thursday, calling the South's move to suspend operations, in retaliation for Sunday's rocket launch by the North, a "declaration of war".

The North declared the industrial park, run by the rivals as a symbol of cooperation for more than a decade, a military control zone, the agency that handles its ties with Seoul said, according to the official KCNA news agency.

Dozens of South Korean trucks were already returning across the border earlier in the day, laden with goods and equipment, after the South said it was pulling out.

"Unpardonable is the puppet group's act of totally suspending the operation in (Kaesong), finding fault with the DPRK's H-bomb test and launch of a satellite," the North's Committee for the Peaceful Reunification of Korea said, referring to South Korea.

Isolated North Korea regularly dismisses the South as a puppet of the United States and just as regularly accuses both of acts of war against it.

DPRK is short for the North's official name, the Democratic People's Republic of Korea. North Korea tested what it said was a hydrogen bomb on Jan. 6 and on Sunday launched a rocket, putting a satellite into orbit.

The United States, Japan and South Korea said Sunday's launch was a ballistic missile test, and like last month's nuclear test, a violation of U.N. resolutions. The U.S. Senate voted unanimously in favor of tougher sanctions.

North Korea ordered South Koreans out of the zone by late afternoon, forbidding them to take anything other than personal belongings, KCNA said. South Korea said after the North's announcement that its top priority was the safe return of all of its people.

Halting activity at the park, where 124 South Korean companies employed about 55,000 North Koreans, cuts the last significant vestige of North-South cooperation - a rare opportunity for Koreans divided by the 1950-53 war to interact on a daily basis.

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North Korean workers were given a taste of life in the South at the complex, about 54 km (34 miles) northwest of Seoul, including snack foods like Choco Pies and toiletries that were resold as luxury items in the North.

They also rubbed shoulders with their managers from South Korea. Supporters of the project said that kind of contact was important in promoting inter-Korean understanding, despite concerns that Pyongyang might have used proceeds from Kaesong to help fund its nuclear and missile programs.

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Except for Kaesong, both countries forbid their citizens from communicating with each other across the world's most fortified frontier.

"We piled up instant noodles, bread and drinks in our warehouse so North Korean workers could come here and eat freely," said Lee Jong-ku, who runs a firm that installs electrical equipment for apparel factories in Kaesong. "We don't mind them eating our food, because we only care about them working hard."

For the North, the revenue opportunity from Kaesong - $110 million in wages and fees in 2015 - was deemed worth the risk of exposing its workers to influences from the prosperous South. In recent years, North Koreans have had increasing access to contraband media, exposing them to life in the South and China.

Still, Pyongyang took precautions to ensure the workers it hand-picked for the complex had minimal contact with their South Korean managers that could be potentially subversive.

"These North Korean workers are strongly armed ideologically," said Koo Ja-ick, who was waiting on the south side of the border on his way to Kaesong, where he has worked at an apparel company for the past four years.

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"They never act individually. They always work and move in a group of two, even manager-level people do so. They never go to the bathroom by themselves - always in groups," he said.

The average wage for North Korean workers at Kaesong was roughly $160 a month, paid to a state management company. The workers received about 20 percent of that in coupons and North Korean currency, said Cho Bong-hyun, who heads research on North Korea's economy at IBK Bank in Seoul.

A South Korean government official involved in North Korea policy said it was difficult to see how operations could be resumed anytime soon at Kaesong, which opened in 2005.

Shares of several leading companies in the Kaesong zone plunged in Thursday trading, falling by nearly 10 percent or more. Defense shares, on the other hand, performed strongly.

Despite volatile North-South relations over the years, Kaesong had been shut only once before, for five months in 2013, amid heightened tensions following its third nuclear test. Its future had often seemed uncertain over the past decade.

http://www.reuters.com/article/us-northkorea-satellite-kaesong-idUSKCN0VK0CO