South Korea’s business community on Wednesday expressed hopes that the shutdown of an inter-Korean industrial park in the North’s border city will be lifted at an earlier date as it could wreak financial havoc on local firms operating there.
Earlier in the day, the South Korean government announced a complete shutdown of the Kaesong Industrial Complex in the North‘s border city of the same name, the last remaining symbol of inter-Korean reconciliation, in response to the North’s recent nuclear test and long-range rocket launch.
On Sunday, the North launched a long-range rocket carrying a satellite, which Seoul and Washington view as a cover for a banned test of intercontinental ballistic technology.
A total of 124 South Korean companies are operating in the zone, some 50 kilometers northwest of Seoul, employing more than 54,000 North Korean workers to produce labor-intensive goods, such as clothes and utensils.
The complex, opened in 2004, has served as a major revenue source for the cash-strapped North, while South Korea has benefited from cheap but skilled North Korean labor. The South Korean firms annually provide about $100 million in total to North Korean workers as income.
“Despite a series of provocations by the North in the past, the Kaesong Industrial Complex had served as a symbol of reconciliation and cooperation on the peninsula,” the Korea International Trade Association said.
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The Korea International Trade Association building in Gangnam |
“We hope that the jointly-run industrial park should resume its operations after soured inter-Korean relations ease, and urge the North to have in mind that any country would not invest in it unless it ceases provocations,” it said.
The suspension of the complex is Seoul‘s toughest measure. It cuts off North Korea’s official remaining source of hard currency from the South.
The complex had been recognized as an exception to Seoul‘s sanctions against Pyongyang designed to punish it for the sinking of a South Korean warship in 2010.
In April 2013, the North shut down the complex for about four months, citing what it called heightened tensions sparked by a military drill between Seoul and Washington. In February of that year, the North conducted its third nuclear test.
The two Koreas agreed not to shut it down again “under any circumstances” when they decided to reopen it.
The government also added that it will provide the necessary support to the South Korean firms at the complex to help minimize their financial losses.
Meanwhile, an association of South Korean firms operating in the Kaesong Industrial Complex urged the South Korean government to review its decision to shut down the jointly-run industrial complex.
“We strongly urge the government to reconsider,” said Jung Ki-sup, the chief of the association. “We were abruptly informed of the decision... and we make it clear that recovering damages to be inflicted on our firms will not be possible in any way.”
In order to minimize possible losses that South Korean firms can face from the closure of the jointly-run industrial park, the country’s financial regulator said it would provide financial aid to those firms operating in the complex.
For one, the maturity of loans extended to such firms will be extended with repayment of maturing debts to be rolled over.
Also, state-run financial institutions will provide emergency lending to those firms suffering from a cash shortage, the Financial Services Comission said.
Also, Yim Jong-yong, the chief regulator, said it needs to respond quickly to any possible fallout from the rising tension on the peninsula on the local financial market.
The financial regulator said it will, if necessary, roll out a set of measures aimed at helping stabilize the local financial market. (Yonhap)
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