Kaesong factory shutdown severs inter-Korean cooperation (updated)

SHINWON

11/02/2016 06:37

* Kaesong grew out "Sunshine Policy" of late 1990s 
    * Decade-old park was last vestige of inter-Korean 
reconciliation 
    * Kaesong offered North Koreans rare window into South 
    * A return to Cold War's last frontier? 
 
 (Adds defence shares rose; Kaesong-related shares fell) 
    By Ju-min Park 
    PAJU, South Korea, Feb 11 (Reuters) - Dozens of South Korean 
trucks returned across the North Korean border on Thursday, 
laden with equipment and goods from the Kaesong Industrial 
Complex, after Seoul suspended operations there as punishment 
for the North's weekend rocket launch. 
    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. 
    Isolated North Korea faces mounting pressure following what 
it says was a satellite launch on Sunday. Washington, among 
others, said it was a ballistic missile test, and like last 
month's nuclear test, a violation of United Nations resolutions. 
    The top military officers from the United States, South 
Korea and Japan agreed late on Wednesday to step up 
information-sharing and coordination of security efforts in 
light of increasing North Korean threats. Earlier, the U.S. 
Senate voted unanimously in favour of tougher sanctions. 
 urn:newsml:reuters.com:*:nL2N15Q02Z 
    At the Kaesong complex, about 54 kilometres (34 miles) 
northwest of Seoul, North Korean workers were given a taste of 
life in the south, 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 isolated Pyongyang might have used proceeds from 
Kaesong to help fund its nuclear and missile programmes. 
     
    RISKS AND REWARDS 
    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, breads 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. 
    "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. 
     
    NOT REOPENING SOON 
    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 the decision was taken reluctantly, and that 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,  
including apparel maker Shinwon  009270.KS  and watchmaker 
Romanson  026040.KQ   plunged in Thursday trading, falling by 
nearly 10 percent or more. Defence shares, on the other hand, 
performed strongly, including Victek Co Ltd  065450.KQ  which 
ended trading up 29.9 percent.  
    Despite volatile North-South relations over the years, 
Kaesong had been shut only once before, for five months in 2013, 
when North Korea pulled out its workers amid heightened tensions 
following its third nuclear test. Its future had often seemed 
uncertain over the past decade. 
    Lee, who runs the electrical gear installation firm, said a 
North Korean official expressed worry when he went to pay taxes 
last month, weeks after the fourth nuclear test. 
    "A North Korean officer there quietly asked me if Kaesong 
was going to be closed. And I said I don't know. And he said he 
thinks it will be closed, looking worried."       
 
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S. Korea defence shares surge    nL3N15Q019 
N.Korea not completely ostracised    nL3N15Q019 
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 (Additional reporting by Jack Kim in Seoul; Writing by Tony 
Munroe. Editing by Bill Tarrant.) 
 ((tony.munroe@thomsonreuters.com; +82 2 3704 5640; Reuters 
Messaging: tony.munroe.thomsonreuters.com@reuters.net)) 
 
Keywords: NORTHKOREA SATELLITE/KAESONG