N. Korea Expels Half of the South Koreans from Kaesong.

North Korea has allowed 880 South Korean people to stay in the inter-Korean industrial complex in the border city of Kaesong, far less than expected by the South, South Korea’s Unification Ministry spokesman said Monday. North Korea verbally informed South Korea of its decision Sunday night, Kim Ho Nyoun told a press briefing. [Kyodo]

You say that like it’s a bad thing.

Updates: The better media reporting on this subject probes two questions: (a) how will this affect Kaesong and the grand “engagement” scheme into which it fits, and (b) why the hell would the North Koreans bite the second of the two biggest tits they were feeding from? The Daily NK, in particular, has a lot of great stuff today. Let’s take those questions in sequence, starting with the impact:

Dong Yong Seung, the Economic Security Team Chief at SERI, emphasized, “The concern that North Korea would use the Kaesong Project as a political card has become reality. This will pose a problem for the future progress of the Kaesong Complex.”

Chief Dong said, “North Korea makes approximately one hundred million dollars from Mt. Geumgang Tours and the Kaesong Complex every year. This may be a huge sum of money relative to the entire North Korean economy, but it may not be such a large amount politically.”

He pointed out, “When the North takes such measures, the future investment environment in the country, especially as it pertains to South Korean companies going in, will be impacted quite negatively. A possible decrease in the number of companies trying to invest in the North will damage the North Korean economy.” [Daily NK]

“I don’t think North Korea appreciates the damage they’re doing to themselves. The border closing comes off as arbitrary and capricious and chokes off business that otherwise could have been developed,” said Marcus Noland, a North Korea scholar at the Peterson Institute for International Economics in Washington.

“If you were an investor, would you put down real money in that sort of place?” he asked. “I have tried to explain to Pyongyang officials, when you do things like this, it’s not like everybody just forgets.” [L.A. Times]

Really, you have to wonder why anyone would be stupid enough to invest dime one in North Korea. I suspect that North Korea’s brazenly self-defeating actions will disillusion plenty of potential enablers about transforming a regime that is vigilant toward, and diametrically opposed to, any engagement broad enough to effect any such transformation. I had guessed from the beginning that if the boosters of Kaesong were right that it would have a transforming effect on the workers there, that this would be Kaesong’s undoing. At least one North Korean official, interviewed by the Daily NK, offers support for that hypothesis:

He pointed out that, “In North Korean society, a criticism has been heard, that “˜Our workers are sinking into capitalism as time goes by.’ It is practically impossible to recruit substitute personnel over and above the current workers from regions farther away than Kaesong. [Daily NK]

That would help explain, to a degree, why the regime is said to be shifting to a strategy of seeking Chinese investment in a special economic zone at Sinuiju instead.

The fact that the regime has its own internal reasons for doing whatever it is doing to Kaesong doesn’t mean that they aren’t also trying to gain some political advantage from it:

Analysts believe today’s move also was directed at the incoming administration of President-elect Barack Obama, sending a message that North Korea is not a nation to be taken lightly. Pyongyang recently announced that international inspectors monitoring its nuclear program could not remove samples from the country. [….]

Analysts say the North seeks to humiliate its neighbor by closing the lucrative South Korean-run industrial park, which is widely viewed as a symbolic propaganda victory for the southern capitalists. Each day, thousands of Seoul entrepreneurs and workers cross the heavily guarded demilitarized zone to run dozens of factories.

But the closure comes at a painful price for the North. The factories employ 35,000 North Koreans, providing badly needed salaries in a nation whose 23 million citizens have faced continued deprivation and famine. [L.A. Times]

The Daily NK finds some validation for a related theory, from an anonymous North Korean source:

Here in the North, they are putting out propaganda that a war is likely to break out right now, “Lee Myung Bak is making tension while holding the levers of power.; “The American imperialists and the South Chosun (Korea) puppets are trying to bring on war every day. People here feel so nervous about the current trend due to such propaganda being spread through lectures and meetings of the People’s Units.

Do you know how many rumors circulate in this society? “The American imperialists and the South Chosun puppets bought rice on a large scale from China in order to try to starve us to death, so the rice price went up”; “America and South Chosun has put pressure on China not to support us with rice.; “A specially-trained brigade of the puppet army (the Korean Army) is entering, on a special mission to destroy our society.

In this situation, [North Korean] state newspapers and broadcasts say that “The South Chosun is madly preparing for invasion, so we need to take firm steps. Who wouldn’t believe it? I am not sure how big the Kaesong Complex is, but we did more serious work than this in a much more terrible situation: the nuclear test. [….]

Compared to our nuclear test situation, the latest case related to the Kaesong Complex is nothing. Our officials have a sort of a stereotype of the South: “Strong pressure on the South can bring us benefit. Officials of the Central Committee of the Party say proudly that, “We have free rein to play with South Korea. As long as we decide to dismantle the Kaesong Complex, it will be done. [Daily NK]

One GNP lawmaker offers a more interesting theory:

Yoon Sang Hyun of the Grand National Party stated Wednesday that, “North Korea has reached the limits of its ability to operate the Kaesong Industrial Complex.

Yoon, a member of the Diplomacy, Commerce and Unification Committee of the National Assembly claimed in a press release that, “The family background of 35,000 North Korean workers were examined, even their relatives’ families up to the level of third cousins were examined. He added that, “When the first development plan, 450 enterprises to be stationed in Kaesong by 2010, is achieved, 100,000 North Korean workers will be necessary. However, there are no further workers who have passed through the family background inspection. [Daily NK]

So how should South Korea respond? This advice seems wise:

First, there is no reason for the South Korean government to be stirred since this type of North Korean behavior is typical. North Korea is just doing what it has always done.

Kim Jong Il has already decided to pressure the South Korean government until it yields. That is just Kim Jong Il’s style. [Daily NK]

It is foolish enough for Seoul to have to beg Pyongyang for the privilege of giving them more money. How much more foolish would it be for Seoul to make concessions to Pyongyang to encourage them to ease restrictions on the Gaeseong complex when the latter is clamping down for reasons that have little or nothing to do with South Korean policy?

Pyongyang already has every economic incentive to keep the Gaeseong complex open. Giving them more concessions now will not change their behavior and will give Seoul even less leverage when Pyongyang eventually does decide to talk again. You cannot bargain with something you have already given away. [Andy Jackson in the Korea Times]