`SK Companies in Kaesong Withold Pay to NK Staff`

Certain South Korean companies that entered the inter-Korean industrial complex in Kaesong in 2007 or after have withheld wages to their North Korean staff this month in protest of the North’s demand for steep raises.

The companies will reportedly hold a meeting this week on coping with Pyongyang’s demands for drastic wage and rent hikes.

An association of South Korean businesses operating in the complex also asked the Unification Ministry last weekend to provide funding support.

In an interview with The Dong-A Ilbo, the head of one of the companies that entered the complex in 2007 said about 10 companies undergoing management difficulty there have not paid their North Korean staff this month.

“More businesses are following suit because of management difficulties coupled with the North’s excessive demands,” he said.

Companies at the complex normally pay their North Korean employees on either the 10th or 25th of each month. Certain enterprises occasionally failed to pay on time because of management difficulty, but this is the first time for them to do so in protest of the North’s demands.

The company head said he had planned to pay wages worth 150 million won (119,617 U.S. dollars), but that he ordered the manager of his Kaesong plant not to pay immediately after the North demanded a raise to 300 dollars a month, more than four times the average wage in the complex.

“Until last month, latecomers to Kaesong did not hesitate to take out loans to send money to the North,” he said. “We’ve now come to a point where we cannot take on debt to pay wages considering the situation in Kaesong.”

About 10 companies will attend the meeting this week to discuss the situation. They said the quality of labor has deteriorated since the early days of the complex in 2004.

The association of South Korean companies in Kaesong also sent an official request to the Unification Ministry Friday for 61.1 billion won (48.7 million U.S. dollars) in financial support. The body’s chairman Kim Hak-kwon visited the ministry to submit the written request based on a survey of the deficits of Kaesong companies.

According to the survey, 82 of 106 companies suffered combined losses of 31.3 billion won (25 million dollars) over the six-month period between December last year and last month.

An association source warned yesterday that without financial support from the ministry, many South Korean companies in the complex will face bankruptcy.

Companies operating in an apartment-style plant in Kaesong saw their first pullout of a company last week. They decided in a meeting Friday that they will wait a little longer to see where working-level inter-Korean talks go.

Denying a series of withdrawals from Kaesong, Chairman Kim said the companies will patiently wait for the results of the talks.

jmpark@donga.com