Companies Eyeing Move Out of Inter-Korean Complex

A semiconductor component manufacturer operating at the inter-Korean industrial complex in the North Korean border city of Kaesong moved part of its production line to South Korea at the end of last month.

The company cited as the reason disrupted operations due to North Korea’s frequent border closures.

South Korean watch manufacturer Romanson, a major player at the complex, also said it is reviewing plans to move part of its critical production lines to either South Korea or China in case the complex is shut down due to deteriorating inter-Korean relations.

Representatives at the complex and financial sources said yesterday that the semiconductor component manufacturer moved part of its production facility to Seoul immediately after Pyongyang severed the military hotline and suspended border traffic March 9.

The North cited a joint military exercise between South Korea and the United States as the reason for the closures.

“North Korea’s border traffic suspension caused a delay in supply that incurred huge losses. We had no choice but to move the production facility,” the manufacturer’s chairman said.

“In fact, many South Korean companies running factories in both Koreas and China have begun to shift their assembly lines out of the complex.”

Many companies in the complex preparing for production line transfer began to discuss withdrawal plans from the middle of last month, when workers had limited access to the complex.

Romanson has been reviewing measures to move its core assembly lines to South Korea or secure a separate plant in China since Pyongyang forced out half of its resident workers at the complex in December last year.

As one of 15 pilot companies at the complex, the watchmaker is run by Kim Ki-mun, who is also chairman of the (South) Korea Federation of Small and Medium Business. He also chaired the association of companies at the complex for two years since June 2006.

“It’ll be difficult to withdraw on our own because of the collaborative production system involving seven different companies,” a Romanson source said. “Nonetheless, reality forces us to review a production transfer.”

“Our working-level team recently presented an emergency management plan elaborating on the transfer to the chairman.”

If companies move key production lines out of the complex to South Korea or China, this will deal a serious blow to inter-Korean economic cooperation.

legman@donga.com sukim@donga.com