S. Korean exit from N. Korea industrial complex may boost tensions

Calum MacLeod, USA TODAY | USA TODAY

BEIJING – South Korea's announced removal of its last managers at a North Korean factory complex ends a significant venture the two nations had built together to normalize relations and make peace, analysts said Monday.

"Very, very unfortunate," said Ahn Yin-hay, an international studies professor at Korea University in Seoul. "It was the last connection between North and South Korea."

Since the complex began operations in 2004, Kaesong had weathered several storms in relations, "but now it is like a game of chicken between North and South Korea," Ahn said.

If the closure endures, the North may declare the factory zone North Korean property as it did with a joint tourism project at the Mount Kumgang, she said, possibly ramping up tensions even further.

All but seven South Korean workers left the joint industrial complex in North Korea on Monday after officials delayed their departure for several hours, according to the South Korean Unification Ministry. Those left behind were negotiating the final unpaid wages for North Korean workers.

Before the shutdown, 123 South Korean companies were operating at Kaesong making clothing, car parts and semiconductors just 10 miles north of the border. The factories employed 800 South Koreans and 53,000 North Korean workers in a country where there is little economic activity and widespread poverty.

South Korea supplied rail service and the electricity, given that North Korea is unable to generate sufficient power. Wages were paid directly to the North Korean government.

The closure follows weeks of threats of war from Pyongyang. North Korea has been angered by tougher United Nations sanctions imposed after its Feb. 12 nuclear test, and by joint U.S.-South Korea military drills that end Tuesday.

Pyongyang withdrew its workers in early April but South Korea kept some its people there to try and revive operations.

The Kaesong zone was a rare source of hard currency for one of the world's most isolated nations. Some South Korean analysts fear the complex may be shuttered for several years, just as the Mount Kumgang tourism project has failed to restart since a South Korean tourist was shot and killed there in 2008.

Pyongyang is using the complex to pressure Washington to the negotiating table, to talk about the armistice agreement and other issues, said Ahn. Economically, Kaesong "was really worthwhile for North Korea," but when it wants dialogue North Korea delivers "a strong stance and a very strong signal," she said, as shown in recent months by its third nuclear test and its abolishing of an armistice agreement that ended hostilities during the Korean War in the 1950s.

Also, on Saturday, the North's official news agency KCNA said a U.S. citizen would soon be tried on charges of attempting to overthrow the North Korean government. Pae Jun-ho, known in the United States as Kenneth Bae, has been held since last year in North Korea after entering as a tourist. Under North Korea's criminal code, Bae could face the death penalty.

There remains some hope that dialogue could restore cooperation, said Lim Eul-chul, a professor of North Korean studies at Kyungnam University in Seoul, and an expert on Kaesong. Both sides are making similar arguments, asking the other to take positive steps first, as both "want to maintain the Kaesong industrial complex, but North and South Korea cannot agree on anything at the moment," said Lim.

South Korea's Foreign Minister Yun Byung-se said Monday that the complex can be reopened. The North Korean government recognizes the economic importance of Kaesong, but, politically, it cannot accept what its sees as "aggressive" moves by South Korea and the USA, said Lim of Kyungnam University.

Seoul took a long time -- one year and nine months -- to finally close the Kumgang tourism project, and may take just as long to declare Kaesong closed, so "North and South will find some opportunities to have a dialogue, even in the very near future," he said. "But I'm not so sure it will be successful."

Closing Kaesong not only cuts off income for North Korea but also ends an invaluable way of helping the North learn how to build its economy, said Lim.

North Koreans picked up plenty of technical know-how they want to spread to other, inland areas, said Lim.

The latest developments may also imperil the North's desire to to increase trade and investment though special economic zones in China, the North's only important ally. But without a success story in Kaesong, the Chinese government and potential Chinese investors lack confidence in the fledgling Korean zones, said Lim.