S. Korean Defense of Kaesong Raises More Questions Than Answers

Last spring, the U.S. Special Envoy on Human Rights in North Korea and some  NGO’s first raised concerns about the rights of workers at North Korea’s Kaesong Industrial Park, which  hosts just  over a dozen South  Korean factories.   The  Unification Ministry initially tried to allay those concerns by bringing journalists and some foreign dignitaries up to Kaesong for guided tours. 

This did not work  as planned.  The U.S. Ambassador wandered around and snapped pictures of all the U.S.-made machine tools that may well have been imported in violation of the Export Administration Act.  A visit by the Special Envoy, Jay Lefkowitz, was cancelled when North Korea spat missiles at all the neighbors in July.   The U.S. Trade Representative adamantly refused to consider including Kaesong-made goods in a Free Trade Agreement.  Journalists depicted Kaesong as bleak, Orwellian, and tightly sealed off from the rest of North Korea.  One reported that workers take home as little as a nickel an hour  for their labors.  In fact, if  pre-tax salaries are paid at  North Korea’s  inflated official exchange rate, they may take home even  less.

After the first strategy failed, both Koreas ignored the criticism and did what they wanted to do anyway.   

Then came North Korea’s nuclear test on October 9th, followed swiftly by  U.N. Security Council Resolution 1718.  Suddenly, the issue of Kaesong went beyond questions for human rights and business ethics.  A disagreement  between peace-loving Koreans  and  rabid Washington neocons had become a disagreement between the  Uri/DPRK  view  and  the sacrosanct voice of the International Community.   Let’s reread  the relevant part of  1718:

[A]ll Member States shall … ensure [emphasis mine] that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of [‘persons or entities designated by the Committee or by the Security Council as being engaged in or providing support for’ … North Korea’s WMD programs]. 

In other words, states that provide funds to North Korea have the burden of proving that the funds aren’t going to, say,  Bureau 39 or other North Korean entities involved in North Korea’s WMD programs.  Given North Korea’s aversion to transparency, that might seem to be a hard case to make without a change of attitudes in North Korea.  But Seoul is desperate.  It’s now claiming to have proof that the wages that Kaesong tenants pay directly to the North Korean  government really go to the  workers after all.

Here, then, is  the UniFiction Ministry’s “confirmation” that Kaesong absolutely, positively isn’t funding North Korea’s WMD programs:

The confirmation follows a meeting between ministry officials and a Korean-Australian businessman, Song Young-dung, according to the ministry spokesman.  Song, head of Australia-based Lobana Trading Co., established a joint trading company in January 2005 with the communist state in Kaesong, which imports goods, mostly food and other basic necessities, to be distributed among North Korean workers at the complex.

Let me see if I understand this.  Our “confirmation” is the word of one Korean-Australian businessman who might well have invested much of his fortune in Kaesong?  No open books?  No  independent audits?  No inspections or monitoring?  No first small  step toward transparency by the North Koreans?  That’s right.

He said the wages paid to North Koreans working in the industrial complex are mostly spent buying goods sold by the joint trading company.  “Media reports that wages earned by North Korean workers flows into the communist state’s Workers Party are not true,” Song said. “Wages paid to them are spent in a transparent way.”  The money paid to Kaesong City is used to finance the construction of infrastructure in the industrial complex, Song said.

May I see some numbers, please?

According to a copy of an account statement, obtained by the Unification Ministry, from Song’s joint company with North Korea, the communist state paid over US$219,000 to Song’s company in March to buy goods from overseas.

The amount accounts for over 74 percent of the total of about $295,000 paid to North Korean workers that month, according to Goh Gyeong-bin, head of the the ministry’s office in charge of the joint industrial complex project.

Currently, South Korean firms operating at the complex pay an average of $600,000 a month in wages to their North Korean employees, but about 45 percent of the total is automatically deducted by the North Korean government for various social and labor insurance fees, according to Goh.

The first problem with this “confirmation” is figuring out what Mr. Song is really claiming.  Does Mr. Song runs some kind of workers’ store or canteen at Kaesong?   Did he set up shop  as Kaesong’s logistician,  its KBR?  Are Song’s food imports  given to the North Korean government and redistributed among all of Kaesong’s workers?  Are they paid from out of the workers’ “wages,” or from the 45% that goes directly to the regime?  And what do we really know about how that other 45% is spent?  The article certainly doesn’t make it clear.

There are other questions, too.  How does Mr. Song know that those who bought / received his wares are Kaesong workers?  How does he know that the distribution was more-or-less even and free from diversion to the black market?   Do we know  enough about where the workers live and eat to verify that  they received the  food Mr. Song imported?   By now, I think  we’re permitted some skepticism about the  assurances of both Koreas  when it comes to how aid is distributed.  The same should apply  to  the “confirmation” of one businessman with a financial interest in  how Kaesong is regulated.

The numbers may not prove much, either, depending on what they mean.  According to this sympathetic report, there are 6,000 North Korean workers working for 15 South Korean companies  at Kaesong.  Assuming that those numbers have remained mostly constant for the last five months, and that Song is feeding all of those workers, that works out to a grocery bill of  $36.50 per worker per month, or $1.21 per worker per day.  Depending on what the workers are eating, what kind of currency is used for the various transactions, what the exchange rates are, it’s conceiveable that  one person could live on that, but just barely.  Pity the poor souls who would have to feed husbands, wives, and kids on that.  If only they had a union on their side.   

Is Song really  saying he  feeds all of the workers at Kaesong?  If so, $600,000 in wages per company (X 15 = $9M per month, minus $219,000 worth of God-knows-what) still leaves a lot still unaccounted for.  Is he suggesting that he’s only feeding his own workers?  Does this mean we’re supposed to extrapolate his wage-to-food ratios to the entire complex without asking to see the books?  Really, Song’s claims  only stress how much more information  we need to evaluate how much of Kaesong’s  wages enrich North Korea’s workers,  as opposed  to its  uranium. 

In other words I have no idea what the hell this actually means. 

An honest, complete, and 1718-compliant resolution of those questions will require more than the prefunctory evidence of one businessman with a financial interest in the Gulag of Tomorrow.  It will require the one thing that has been missing from every single dealing we’ve had with North Korea on nukes, arms, trade, and human rights:  transparency.

(see also)

And we are not done.  I was curious about Lobana Trading Company and its ties to North Korea, and it turns out that they don’t just deal in food. 

We are an Austraian [sic] Company and have been trading worldwide successfully since early 1970.

Recently, We are involved in developing many kind of minerals in North Korea. If you have any interest of minerals, we would be more than just happy to support you.

Meaning that Lobana Trading  is  in partnership with  the North Korean mining industry, which is famous for awful working conditions, and for another very curious thing:

KOREA MINING DEVELOPMENT TRADING CORPORATION (a.k.a. CHANGGWANG SINYONG CORPORATION; a.k.a. EXTERNAL TECHNOLOGY GENERAL CORPORATION; a.k.a. NORTH KOREAN MINING DEVELOPMENT TRADING CORPORATION; a.k.a. “KOMID”), Central District, Pyongyang, Korea, North [NPWMD]

KOREA RYONBONG GENERAL CORPORATION (a.k.a. KOREA YONBONG GENERAL CORPORATION; f.k.a. LYONGAKSAN GENERAL TRADING CORPORATION), Pot’onggang District, Pyongyang, Korea, North; Rakwon-dong, Pothonggang District, Pyongyang, Korea, North [NPWMD]

That’s a snip from  a 2005  notice by Treasury’s Office  of Foreign Asset  Control, blocking the assets of a good share  of North Korea’s mining industry.  All of these entities are suspected of involvement in North Korea’s proliferation of WMD.   The Korea Mining Development Trading Company  was also named as a proliferator in  Executive Order 13,282. 

I can’t directly connect Mr. Song to blocked North Korean entities, because I could find no information on what North Korean entities he’s actually dealing with.  I’d sure like to know, because that would certainly have some bearing on  how he interprets  1718.  If so, I’d love to have Mr. Song on the witness stand for an hour.  I could make that hour last longer than his will to go on living.