Company owners will pay for bowing to North Korean pressure over workers in Kaesong joint industrial zone, says Seoul

This article is more than 5 years old

This article is more than 5 years old

South Korea has said it will punish three factory owners for bowing to North Korean pressure in a wage dispute over workers at the Kaesong joint industrial zone.



The North unilaterally announced in February a wage rise for the more than 50,000 North Korean workers employed by South Korean companies operating in Kaesong, just north of the border.

But South Korea said that, under a previous accord, employment conditions in the zone could be adjusted only with the agreement of both sides.

The Seoul government ordered the companies not to yield to pressure; but the South’s Unification Ministry said three companies had paid the increased wage. A ministry official told AFP: “They will face administrative punitive action for complying with North Korea’s unilateral demand.”

The North’s proposal would increase the average monthly sum the South pays for each worker – including allowances, welfare and overtime – from $155 (£104) to $164 (£110).

The South Korean companies in Kaesong get cheap labour on top of preferential loans and tax breaks from their government, which also effectively underwrites their investment.

Kaesong opened in 2004 and had mostly survived repeated inter-Korean crises that closed every other avenue of co-operation. But in 2013 the North effectively shut down the zone for five months by withdrawing its workers after military tensions rose. Many companies are still reeling from financial losses from the shutdown.

Kaesong is a key earner for the cash-strapped North. The hard currency wages are kept by the state, which passes on a fraction – in local currency – to the workers.