Kaesong Death Watch

For new readers, I am not a fan of the Kaesong Industrial Complex, a zone in North Korea that uses South Korean management and capital, and North Korean laborers that aren’t actually paid wages, so to speak, as much as they’re given food rations as compensation.  The idea was that Kaesong would change North Korea’s society and economy — in the original German, that’s “arbeit macht frei” — but at the first hint of that, the North Korean government predictably started shutting the whole enterprise down and had the official who negotiated the arrangement shot.

Worse, the “wages,” frequently misreported (based on official South Korean Unification Ministry propaganda) as being between $55 and $80 per person per month, are actually paid directly to Kim Jong Il’s regime for God-knows-what actual use.  The workers themselves couldn’t receive much of that after reconversion from North Korea’s highly inflated “official” exchange rate in any event.

Thankfully, Kaesong never came close to the ambitious scale of production that its backers had originally anticipated, and it never succeeded as an export manufacturer.  And now that the North Koreans have nullified all of the contracts, made unilateral demands to quadruple those “wages,” periodically closed the border, and have been holding one South Korean manager incommunicado since March, what foreign investor would want to put money, machinery, and managers there now?  Not surprisingly, all of this has affected Kaesong’s production:

According to ministry data, political tensions were dampening business performance. Combined overseas shipments out of Kaesong park were US$7.15 million in the January-April period, down 56 percent from $16.27 million during the same period a year ago.

The companies’ output also slipped 6.6 percent from last year’s $79.83 million to $74.54 million, despite the increase in the number of firms at the joint park from 72 to 106.  [Yonhap]

The strategy of changing the regime by sustaining its capacity to enslave and terrorize is an obvious failure.  Instead, the way to change North Korea is to starve it of regime-sustaining funding until the regime either (a) collapses, or (b) is forced to accept a firm timetable to accept real transparency and disarmament as a condition of receiving foreign income.

Last week, I reported that South Korean companies were starting to take their equipment out of Kaesong while they still could.  So it is mostly an occasion for celebration that the first Kaesong factory has announced its closure:

The first South Korean company decided Monday to withdraw from the Kaesong Industrial Complex amid constant uncertainty over the future of the inter-Korean project. The apparel company, which mainly makes fur and leather clothes, decided to withdraw from Kaesong completely and filed an application to wind up the business on Monday, a government official said.

The company reportedly decided to call it quits when increasing number of buyers cancelled orders and due to concerns for the safety of South Korean staff as a Hyundai Asan staffer remains locked up incommunicado on sedition charges.  [Chosun Ilbo]

Furs!   Now made with 75% less slave labor!   Buy one for the woman you love who pretends to love you because you buy her stuff!   And who would like to be the spokesman for Kaesong’s trade association, who insists that the withdrawal of this company is just an “isolated case?”  Uh huh.

The Sskin Net owner, Kim Yong-gyu, said growing anxiety over his workers’ safety drove him to pull out. Buyers were also cutting orders in face of the military tension, he said.

“We used to have five workers stay there to manage the factory, but now we manage with only two,” Kim said over the telephone. “Even if the possibility (of a worker’s detention) is just 0.1 percent, I feel it would be a crime to send my employees there.”  [Yonhap]

Because at Kaesong, concern for the safety and welfare of your workers — whether North or South Korean — is never more than an isolated case.  Still, the Unifiction Ministry elevates hope over basic principles of negotiation, diplomacy, morality, and simple common sense:

An advance team of Seoul officials left for North Korea Tuesday to prepare for the second talks on a joint industrial park, as concerns about its future grew after a South Korean firm decided to withdraw.  [….]

“Our government will consider various measures to sustain stable production activities. North Korea also should stop unilateral actions that make the park unstable,” Unification Ministry spokesman Chun Hae-sung said in a briefing.

The four-member advance team traveled to North Korea to prepare for the upcoming talks, but there were few signs that there will be a breakthrough. Little has changed since the previous talks ended bitterly in April, as the two sides could not narrow differences on agenda.  [Yonhap]

In other words, things are going pretty much as I’d predicted five years ago.