Will Inter-Korean Tension Doom the Kaesong Complex?

The number of South Korean workers at the inter-Korean business complex in the North Korean border city of Kaesong will be slashed 50-60 percent to facilitate withdrawal in case of emergency.

A government official in Seoul said Monday, “The government’s current stance on maintaining the complex is not fixed. It could change at any time depending on the circumstances in the event the North takes hard-line measures.”

Fears are rising that the North could detain South Korean employees at the Kaesong complex as it did after blocking inter-Korean overland passage in March last year.

When another government official was asked if Seoul will move to withdraw staff from the complex before Pyongyang blocks passage, he said, “We are bracing for a diversity of possibilities.”

The South Korean government said pulling out South Korean employees in Kaesong all at once will prove difficult since they number 1,000 on average daily.

North Korea experts are divided over the possibility of the complex’s shutdown. A source at a national policy institute said, “The exchange of retaliatory measures between the two Koreas is highly likely to lead to the industrial park’s shutdown. If the freeze in operations continues for more than one or two months, resumption without re-investment will prove difficult considering how facilities and machinery work.”

Others say, however, that the chances of closure are slim for practical reasons. A shutdown will incur a tremendous loss for the North since the South provides infrastructure such as electricity and gas. The complex also employs almost 40,000 North Korean workers.

The news of the downsizing of the Kaesong workforce has hit South Korean companies operating in the complex hard, though they knew it would come. Certain enterprises said they fear Seoul has begun action to shut down the complex, with many shocked after the government notified each company on employee cuts Monday morning.

One apparel company that recently downsized its permanent workforce in Kaesong from 15 staff to seven was told by the South Korean Unification Ministry to make a further cut to two.

The government action has also invited a strong backlash from South Korean companies that wish to maintain operations in Kaesong. The phone line at the ministry’s Kaesong industrial complex business support office was temporarily down due to a flood of calls from companies protesting the downsizing decision.

Given rising speculation that the complex will indeed be shut down, companies that recently entered the business park demanded that Seoul support their exit by revising conditions to receive inter-Korean economic cooperation insurance. Citing their rising deficits due to an exodus of buyers, the companies said protecting the complex is fruitless since even the government has announced downsizing measures.

Consequently, they want the government to enable their exit by revising a provision in the insurance policy disqualifying a company for investment cost compensation in the event of voluntary withdrawal.

zeitung@donga.com sukim@donga.com